Republic of Turkey COURT OF APPEALS, GENERAL ASSEMBLY OF LAW
DOCUMENT NO: 2017/2265
DECISION NO: 2017/1435
DECISION DATE: 22.11.2017
COURT: ….. Civil Court of First Instance
IN WHICH CASES WILL PURCHASE OF AN APARTMENT FROM A CONTRACTOR THROUGH AN ‘ORDINARY WRITTEN’ CONTRACT GIVE REGISTRATION RIGHTS? IF THE APARTMENT HAS BEEN DELIVERED, WHICH WILL BE GRANTED PREFERENCE IF THE CONTRACTOR SELLS THE SAME APARTMENT TO MORE THAN ONE PERSON?
At the end of the trial held for the “title deed cancellation and compensation in case of non-registration” case, which was consolidated between the parties, the Fethiye 3rd Civil Court of First Instance ruled on the request for title deed cancellation and registration in the main case. The appeal review of the decision dated December 19, 2014, numbered 2014/319 E. and 2014/426 K., dated December 19, 2014, regarding the rejection of the claim for compensation and the acceptance of the request for title deed cancellation and registration in the consolidated case, was requested by the attorney of the plaintiff in the main case, …. The 14th Civil Chamber of the Court of Cassation, in its decision dated March 18, 2014, numbered 2013/16460 E., 2014/3665 K., ruled:
“…The main case concerns the cancellation of the title deed registration of the independent unit No. 6 on the 2nd floor, based on the assignment of the contractor, and its registration in the plaintiff’s name, and the second-stage compensation claim.
In the consolidated case, the plaintiff… requested the cancellation of the title deed registration of the independent unit No. 6 on the 2nd floor, based on the assignment of the contractor, and its registration in his name.
The court ruled that the title deed cancellation in the main case be granted. The court ruled to reject the registration request, accept the compensation claim, and accept the consolidated case.
The attorney for the plaintiff in the main case and the attorney for the defendant … appealed the judgment.
In the main case, the plaintiff …’s claim is based on the ordinary written assignment agreement dated October 14, 2005. The plaintiff stated that he had made payments to the defendant contractor through İş Bankası, using the assignment agreement dated October 14, 2005, and receipts dated November 8, 2005, and November 18, 2005, and that he had a remaining debt of 5,000 TL.
The defendant contractor … initially denied the assignment and the signature, and then relied on the report dated May 22, 2012, of the Independent Physics Specialization Department of the Forensic Medicine Institute, and the documents dated November 14, 2005, November 8, 2005, and November 18, 2005. The signature was determined to be the work of …. At the hearing dated January 22, 2013, he stated that he sold the property to … and transferred possession of it. However, because the sale price was not paid to him, he sold the same property to …, the plaintiff in the consolidated case, under a promise to sell agreement. Therefore, there is an assignment transaction that will have a legal effect and consequences for the plaintiff ….
The defendant landowner …’s attorney argued that the Fethiye 3rd Civil Court of First Instance, in its decision numbered 2006/341 – 2010/113 EK dated February 24, 2010, registered the property in the contractor’s name, and therefore dismissed the case against them.
Indeed, a contractor may transfer the personal rights acquired through a construction contract in exchange for a share of the land with the landowner to a third party through an assignment of receivables contract, unless prohibited by the contract. The assignment of receivables is between the creditor and the third party who acquired the property. It is a formal contract that can be executed without the debtor’s consent and is merely a acquisitive transaction. According to Article 163 of the Code of Obligations, an assignment agreement can be established by written agreement between the assignor and the assignee. However, the written form required for the assignment of the receivable does not preclude the formal execution of the assignment agreement.
The plaintiff in the consolidated case, …, also relied on the promise to sell agreement it executed with the defendant, …, on September 23, 2010. It is irrelevant whether the agreement concerning the assignment made by the contractor to … was drawn up at a notary public. Because, as mentioned above, according to Article 163 of the Code of Obligations, a written assignment is sufficient.
It appears that the contractor assigned the personal right it acquired from the landowner to both the plaintiff, …, and the plaintiff, …, of the consolidated case, through assignment agreements.
In practice, the contractor assigned the same independent section to one or more third parties on different dates through the assignment of the receivable or It is a common situation where one or more assignees, having assigned a property through a promise to sell, claim rights over the same independent unit. Similarly, it is also possible for the owner to subsequently promise to sell the property made the subject of a promise to sell contract to another person. In such cases, competing personal rights arise. As a rule, unless invalidated or the contract is terminated, the earlier of the competing personal rights is given value. As emphasized above, it is irrelevant whether the contractor made the sale formally (through a promise to sell contract at a notary public) to one or more third parties or through an ordinary written contract to the others. The crucial point is the date of the assignment to the third parties claiming personal rights.
In the present case, since the plaintiff … relied on the assignment agreement dated October 14, 2005, and the plaintiff in the consolidated case … relied on the promise to sell agreement (assignment transaction) dated September 23, 2010, the contract underlying the plaintiff …, which was dated earlier, should be recognized in the competing personal rights. Therefore, the remaining debt of the plaintiff … from the sale price should be determined and deposited in the court’s treasury to be paid to the defendant contractor. In accordance with the principle of joint performance, the transfer of ownership request in the main case should be accepted and the consolidated case should be dismissed. However, the dismissal of the request in the main case without considering the principle of joint performance was deemed incorrect, and therefore, the judgment should be overturned.
According to the acceptance: It is understood that in the session dated December 3, 2010, the case was decided to be heard as a Consumer Court. Although this issue was not stated in the reasoned decision, since the error was based on a material error, it was merely addressed…”
The case was overturned and the case was returned to its original location. Following the retrial, the court upheld the previous decision.
GENERAL LEGAL ASSEMBLY DECISION
After reviewing the General Legal Assembly, it was determined that the decision to resist had been appealed within the timeframe, and the documents in the case were read, the necessary action was taken:
The main case sought compensation based on the contractor’s assignment, and if registration is not possible, the title deed was cancelled and the combined case sought registration.
The court ruled that the main case should be dismissed for the cancellation of the title deed and the request for registration due to non-payment of the sale price. The plaintiff should collect the 120,000.00 TL paid by the plaintiff, plus interest accruing from the date of the lawsuit, from the defendant …. The lawsuit filed against the defendant … The decision dismissing the case on the grounds of lack of party status and accepting the request for title deed cancellation and registration in the consolidated case was overturned by the Special Chamber upon appeal by the plaintiff …’s attorney, for the reasons explained in the heading section above.
The Local Court resisted the previous decision on the grounds that the Unification of Jurisprudence Decision No. 1987/2, Decision No. 1988/2, dated September 30, 1988, was inapplicable to the present case because the plaintiff had not fulfilled his obligation to pay the sales price arising from the contract, nor had the independent section been delivered to the plaintiff. The plaintiff …’s attorney appealed the decision.
The dispute, brought before the General Assembly of Civil Chambers through resistance, was brought before the General Assembly of Civil Chambers through resistance. In accordance with the principle of joint performance, the remaining debt of the plaintiff … from the contracted sales price should be determined and deposited for payment to the defendant contractor Süleyman Nas, thereby excluding the title deed of the independent section No. 6 in the name of the defendant …. The issue centers around whether the cancellation of the registration and registration of the contract in the name of the plaintiff in the main lawsuit can be decided.
To resolve the dispute, it is useful to first provide an explanation of the construction contract in exchange for a land share.
A construction contract in exchange for a land share is a contract in which the landowner undertakes to transfer ownership of certain shares of their land to the contractor. In return, the contractor undertakes to construct independent units on the land and transfer those of these independent units belonging to the landowner (Erman, H: Construction Contract in Exchange for a Land Share, 3rd Edition, Istanbul 2010, p. 1; Coşkun, G.: Legal Status of Third Parties Gaining Rights from the Construction Contract in Exchange for a Land Share, 1st Edition, Ankara 2010, p. 25). In other words, a construction contract in exchange for a land share is a synallagmatic contract. The contractor undertakes to construct a building on the land with the specifications agreed upon between the parties and in compliance with zoning regulations, while the landowner(s) undertake to perform the obligation. The contract undertakes to transfer the designated land share.
This contract is not regulated by the Code of Obligations. However, such a contract can be concluded within the framework of the principle of freedom of contract. Since the landowner’s obligation in the contract is to deliver the land and transfer ownership of the shares—in other words, because the contract concerns a real estate—the manner in which it is executed is also important. However, since the transfer of real estate ownership is involved, this contract must be made in a formal manner. Article 213 of Code of Obligations No. 818 (TCC 237), Article 706 of the Turkish Civil Code No. 4721, Article 60 of the Notary Law, and Article 26 of the Land Registry Law stipulate that contracts for the sale of real estate must be made in a formal manner.
The formal requirement here is not a requirement of proof, but rather a requirement of validity. Although a contract made without complying with the official form would face the sanction of absolute nullity, an exception was introduced with the Unification of Jurisprudence Decision No. 1987/2, Principle No. 1988/2, dated September 30, 1988.
The aforementioned Unification of Jurisprudence Decision: “As a rule, a registration lawsuit filed based on a contract that creates an obligation to transfer ownership of a real estate registered in the land registry, and is invalid only if it is not executed in accordance with the formal conditions stipulated by law, cannot be accepted. However, in cases where the parties agree to sell an independent section of the real estate whose construction has begun under the condominium law without a valid contract, and the buyer pays all debts, and the seller delivers the independent section and uses it as if it were the owner, but the seller does not agree to the transfer of ownership in the land registry, the judge may accept the registration lawsuit, taking into account Article 2 of the Civil Code, depending on the nature of the case.” The aforementioned Decision to Unify Jurisprudence aims to prevent individuals constructing buildings, whether on their own property or on the property of third parties, from using the proceeds of independent units sold during the construction phase of the building, only to subsequently exploit the formal requirements stipulated in the aforementioned legal articles due to inflationary depreciation and, inversely, the resulting appreciation of the sold property, thereby violating Article 2 of the Civil Code. However, this exception is not absolute. The building to which the decision to unify jurisprudence applies must comply with zoning regulations and not be an illegal structure. In construction contracts in exchange for a land share, the contractor’s primary obligation is to construct the building in accordance with the contract, its purpose, and scientific and artistic principles, and deliver it to the landowner. Upon fulfillment of the contract, the contractor may transfer the resulting personal rights to a third party.
Under a construction contract in exchange for a land share, the contractor does not own the land shares, but rather has a claim on the transfer of the land shares to himself. Based on the contractor’s right arising from the construction contract in exchange for a land share, the contractor may request the registration of ownership of the land shares belonging to the independent units in their name, and may also transfer this right to a third party. In this case, this is not a sales contract for the registered real estate, but rather a transaction subject to the provisions on assignment of receivables regulated in Article 162 of the Code of Obligations (TCC 183) and subsequent articles. In other words, in such cases, the contractor is deemed to have assigned to the third party the right to request the transfer of the independent unit and the associated land share, which it may request from the landowner under the contract. In short, in such cases, it should be assumed that there is an assignment of receivables agreement between the contractor and the third party.
Indeed, the same view was adopted in the General Assembly of Civil Chambers’ decision dated July 2, 2003, numbered 2003/14-452, decision numbered 2003/456.
It is useful to examine the provisions on “assignment of receivables” at this point for the resolution of the dispute. The legal regulation regarding the assignment of receivables is contained in Articles 162 to 172 of Code of Obligations No. 818, which must be applied to the dispute in question.
Assignment of receivables is a formal contract between the creditor and the third party transferee, without the debtor’s consent, and is solely a acquisitive transaction. According to Article 163 of the Code of Obligations (TCO 184), an assignment contract can be established through a written agreement between the assignor and the assignee. However, the legal requirement for a simple written form does not preclude the execution of an assignment contract in a formal form. Indeed, in practice, third parties who assign personal rights from a contractor often conclude their assignment contracts in the form of a simple written sales contract or a real estate promise to sell contract.
As can be seen from all these explanations, the contractor of a construction contract in exchange for a land share can, unless prohibited by the contract, directly request the personal right (transfer of the independent section title) acquired against the landowner upon fulfilling the delivery obligation, based on the existing contract with the landowner. Alternatively, they can transfer and assign it to third parties in writing, without requiring the landowner’s consent, by utilizing Article 162 of the Code of Obligations (183 TCC). The third party who acquires the receivable can also assert this right against the landowner by taking advantage of the provisions governing the assignment of receivables. This is because the assignee replaces the previous creditor. They now have the right to demand performance from the debtor and, if necessary, to compel the debtor to perform.
The most significant consequence of the contractor’s assignment of personal rights is that the transferred land share receivable transfers from the contractor’s assets to the assets of the third party. With this transfer agreement, the contractor loses the right to dispose of the land share receivable. Therefore, the contractor is no longer able to dispose of this receivable in any way (Oğuzman, M. K. / Öz, M. Turgut: General Provisions of the Law of Obligations, Vol. II, 11. B., Istanbul 2013, p. 562). However, it is also possible for the contractor to subsequently promise to sell to another person a property previously assigned in writing or through a promise to sell agreement. If the contractor assigns the same independent section to two separate parties, a contest of personal rights exists, and the second assignment will be invalid. Even if the subsequent assignee is unaware of the previous assignment and acts in good faith, the legal situation remains the same. In determining which assignment occurred first, the date of completion of the contract, not the date of the offer, is taken into account. The type of competing rights, i.e., whether the assignments are made in writing or through a promise to sell agreement at a notary, is irrelevant. The dates of the assignments made by the contractor to third parties claiming rights are the primary consideration. In the case of a property whose construction has commenced under Law No. 634 on Condominium Ownership, where the parties agree to sell the independent unit, the buyer pays all debts, and the seller delivers the independent unit and uses it as if it were the owner, but the seller refuses to transfer ownership at the land registry office, the Court of Cassation’s Jurisprudence Unification Decision No. 2/2, dated September 30, 1998, states that the judge may accept the registration lawsuit, taking into account Article 2 of the Turkish Civil Code (TCC), depending on the circumstances of the case.
In light of the explanations provided, the basis for the plaintiff …’s request is the ordinary written assignment contract dated October 14, 2005. Although the defendant …, the contractor, initially denied the assignment by denying his signature, the investigation determined that the signature on the contract belonged to the contractor. Therefore, an assignment transaction that would have a legal effect and consequences exists for the plaintiff.
The plaintiff in the consolidated case, …, also relied on the contractor’s assignment transaction dated September 23, 2010. The notarization of the contract regarding the assignment made by the contractor to … has no priority. Because, as mentioned above, what is crucial is that the assignment be made in writing, as required by Article 163 of the Code of Obligations (TCC 184).
It appears that the contractor assigned the personal rights it would have acquired from the landowner to both the plaintiff … and the plaintiff in the consolidated case, …, through assignment agreements.
In the present case, since the plaintiff … relied on the assignment agreement dated October 14, 2005, and the plaintiff in the consolidated case, …, relied on the real estate promise to sell agreement (assignment transaction) dated September 23, 2010, the earlier contract, which was the basis for the competing personal rights, should be given priority.
On the other hand, although the defendant contractor did not acknowledge the sale relationship between them, in the subsequent stages of the case, the contractor admitted to selling the immovable property to … and handing over possession of it. Furthermore, in the Fethiye 3rd Civil Court of First Instance’s case file number 2006/341, decision number 2010/113 regarding the title deed cancellation and registration filed by … against the landowner …, the plaintiff … was heard as a contractor witness. In his statement, he stated that he purchased the independent section in question from the contractor, took over possession of it, and even had renovations carried out in the independent section. Considering that the contractor did not object to this statement, it should be accepted that the independent section number 6 in question was sold and delivered to the plaintiff …, and therefore, the Unification of Jurisprudence Decision numbered 1987/2, decision number 1988/2, dated 30.09.1988, is applicable to the present case.
In this case, although the contract dated October 14, 2005, between the plaintiff … and the contractor …, which provided for the transfer of ownership of the immovable property, was not drawn up in accordance with the official form required by law, the local court should have considered the conveyance transaction relied upon by the plaintiff … and ruled on the request for title deed cancellation and registration in the main case, since the parties mutually fulfilled their obligations and the immovable property was delivered to the plaintiff …. However, rejecting the request for title deed cancellation and registration of the plaintiff in the combined case, and accepting the plaintiff’s request for title deed cancellation and registration, and registering the immovable property in the name of …, is inappropriate.
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Therefore, while the Special Chamber’s reversal decision, also adopted by the General Assembly of Civil Chambers, should have been followed, resisting the previous decision is contrary to procedure and law.
Therefore, the resisting decision should have been overturned.
RESULT: It was unanimously decided on 22.11.2017 that the appeal objections of the plaintiff’s attorney be accepted and the decision to resist be REVERSED due to the reasons stated in the reversal decision of the Special Chamber, the advance appeal fee be returned to the person who paid it upon request, and the way to correct the decision is open within a period of fifteen days from the date of notification.