According to Article 645 of the Turkish Commercial Code No. 6102 titled Definition of Negotiable Instruments, Negotiable instruments are such promissory notes that the right they contain cannot be claimed separately from the promissory note and cannot be transferred to others. In clearer terms, the exercise of the right inherent in a negotiable instrument depends on the existence of the negotiable instrument in question. Therefore, the debtor of the negotiable instrument is only obliged to pay upon presentation of the promissory note. However, although this is the rule; there may be situations such as the negotiable instrument being lost without the consent of the rightful owner, being torn, lost or otherwise being tampered with, making the essential elements of the promissory note incomprehensible. These situations mean the loss of the negotiable instrument. In these cases, there will be no mention of a negotiable instrument that the rightful owner can present. For this reason, the rightful interests of the rightful owner are protected through certain legally prescribed measures.

The first measure that can be applied in case of loss of a negotiable instrument is to request a payment prohibition decision. A payment prohibition decision can be requested by the rightful owner whose negotiable instrument is lost. The rightful owner whose negotiable instrument is lost can request the said decision from the Commercial Court of First Instance of the place of payment or the place of residence of the holder. It should be noted that in practice, the rightful owner is also asked to provide collateral between 10% and 20% of the amount in the promissory note. Since the payment prohibition decision is a decision that the person to whom the negotiable instrument is presented does not pay the person presenting it, the decision must be notified to the person in order for it to be effective for the debtor of the negotiable instrument.

Another method is related to the loss of the negotiable instrument from the rightful owner’s possession without his/her consent. In such a case, the holder whose negotiable instrument is lost without his/her consent can request the return of the negotiable instrument through a return lawsuit if he/she knows who is holding the negotiable instrument unjustly (Article 763 of the Turkish Commercial Code). Finally, it is necessary to mention the cancellation lawsuit that allows the rightful owner to claim the price contained in the promissory note without having the valuable document in his/her possession in case of loss of the valuable document. According to Article 651 of the Turkish Commercial Code on the subject; if a valuable document is lost, the court may decide to cancel it. At the moment when the valuable document is lost or the loss occurs, the person who has rights on the promissory note may request that the promissory note be cancelled.

It should be noted that the action for cancellation due to loss of a negotiable instrument is only dependent on the existence of the right inherent in the promissory note. For example, since the right does not expire in the event of statute of limitations, it is possible to file an action for cancellation. Regarding the issue, the 11th Civil Chamber of the Court of Cassation has ruled in its Merits No. 2012/7014 and Decision No. 2013/5273 as follows;

The court has ruled to reject the action on the grounds that the promissory note requested to be canceled has become time-barred. Article 563 of Law No. 6762 … stipulates that the person who has rights on the promissory note may request the court to cancel the promissory note in the event of its loss. One of the conditions required to request the cancellation of a negotiable instrument due to loss is that the right inherent in the promissory note continues to exist. However, the fact that the right in the promissory note has become time-barred does not prevent a decision for cancellation. (Prof. Dr. Fırat Öztan, Law of Negotiable Instruments, 1997, p.270).

Another issue that needs to be mentioned is that only the person who has rights over the promissory note can request the cancellation of the promissory note. In other words, only the holder of the negotiable instrument can file a cancellation lawsuit; it is not possible for the drawer to do so. The Court of Cassation 11th Civil Chamber’s Decision No. 2015/10385 and Merits No. 2016/4707 regarding the issue is as follows;

The court ruled to reject the case on the grounds that the plaintiff is the drawer of the checks he requests to be canceled, and that the lawsuit regarding the cancellation of the negotiable instrument can only be filed by the person who has rights over the negotiable instrument at the time it was lost, in other words, only by the authorized holder of the negotiable instrument, in accordance with Article 563/2 of the TCC, and that there is no legal possibility for the plaintiff to file such a lawsuit as the drawer.

The plaintiff’s attorney appealed the decision.

Considering that there is no procedural or legal violation in the discussion and evaluation of the information and documents in the case file and the evidence relied on in the justification of the court decision, all appeal objections of the plaintiff’s attorney are not justified.

The Court of Cassation 19th Civil Chamber’s Merits No. 2013/12610 and Decision No. 2013/17919 is as follows;

The decision to cancel a negotiable instrument due to loss and the provisions of this decision are regulated in Articles 563 and 564 of the Turkish Commercial Code. According to Article 563/1 of the Turkish Commercial Code; “If a negotiable instrument is lost, the court may decide to cancel it. “In Article 564/1 of the same law; “Upon the decision to cancel, the rightful owner may request to exercise their rights without a promissory note or to create a new promissory note.”

There are two important consequences arising from the nature of the decision to cancel. These are stated as the negative and positive consequences of the decision to cancel.

With the decision to cancel, the function of the promissory note, which is one of the most important features of the negotiable instrument, to identify the rightful owner, is eliminated. This is the negative consequence of the decision to cancel. The plaintiff who obtains the cancellation decision gains the right to make payment from the debtor without presenting the promissory note to him. The debtor is also relieved of his debt by making payment to the person who presented the cancellation decision, unless there is fraud or gross negligence.

The positive result of the cancellation decision is that the plaintiff shows his rightful ownership to the debtor, that is, it enables the identification of the rightful owner. Accordingly, the cancellation decision creates a presumption that the plaintiff (the person who obtained the cancellation decision) is the owner of the right inherent in the promissory note and which is now separated from the promissory note by cancellation.

Both effects of the cancellation decision are related to the issue of identification of rightful ownership (determination of rightful ownership). In other words, the cancellation decision only ensures that the holder who lost the promissory note can claim the right inherent in the promissory note to the debtor without a promissory note, and the debtor can relieve his debt by performing the right to the person who obtained the cancellation decision. The decision has no effect in terms of substantive law. The current situation remains the same in terms of substantive law. In other words, the annulment decision does not affect the existence of the right, its content and the authority to dispose of this right.

The cancellation decision does not have the nature of a promissory note that replaces the cancelled promissory note. It only performs the function of identifying the promissory note that has been lost and the cancellation decision grants the holder the right to claim the receivables without a promissory note.

As can be seen, if the debtor fulfills his/her debt without any gross negligence or fraud upon the holder of the cancellation decision presenting the decision only and proving that he/she is the creditor mentioned in the decision, he/she is discharged from his/her debt.

The debtor may raise certain defenses against the person who received the cancellation decision. For example, the debtor may raise the defense that the person who received the cancellation decision does not actually have any rights on the promissory note (he/she has no rights or that his/her right holder status has ended due to certain reasons). However, since the holder of the cancellation decision more or less proves that he/she is the right holder in the cancellation proceedings, the debtor who claims the opposite must prove his/her claims in this direction. With the debtor proving his/her claims, the cancellation decision loses its effect due to loss, i.e. it does not produce any results.

Because of the positive effect of the cancellation decision, the debtor’s performance to the holder of the decision will relieve him of his debt, and therefore the third party in possession of the document may face the defense that the debt has ended. In this case, the third party may file an unjust enrichment lawsuit against the holder of the cancellation decision to whom the performance was made. In other words, in such a case, the third party in possession of the document cannot appeal to the debtor who made the payment to the holder of the cancellation decision in good faith.

REFERENCE

The 11th Civil Chamber of the Court of Cassation, Merits No. 2012/7014 and Decision No. 2013/5273

The Court of Cassation 11th Civil Chamber, Merits No. 2016/4707 and Decision No. 2015/10385

The Court of Cassation 19th Civil Chamber, Merits No. 2013/12610 and Decision No. 2013/17919

Turkish Commercial Code and Related Legislation