Ercüment Erdem Prof. Dr. H. Murat Develioglu

A Bizarre Decision of the Assembly of Civil Chambers of the Court of Cassation Regarding Simulated Transaction of Legator

April 2020

Introduction

In Turkish Law, simulated transaction means that the transaction is void; in other words, it does not bear any legal consequences. Thus, the existence, determination, and proof of the simulation in both inter vivos and testamentary dispositions have caused a lot of ink to be poured, and the Court of Cassation to make countless decisions regarding simulation. The Assembly of Civil Chambers of the Court of Cassation also reached a conclusion that in our opinion, will be thoroughly discussed in its recent decision explained. below. In this newsletter, after briefly mentioning the concepts of simulation and simulated transaction of legator, the decision of the Assembly of Civil Chambers of the Court of Cassation dated 19.02.2019 and numbered 1-479/1178 will be analyzed.

The Concept of Simulation and Its Legal Consequences

“Simulation” is the agreement of the parties of a contract (i) to ensure that the contract they have concluded does not produce any provision or (ii) to give rise to the terms of another contract than the apparent contract.[1]

The parties create an allusion against the third parties with the contract formed by the statements that do not reflect their real intent. However, the parties actually would like the contract (i) not to bear any legal consequences (and it is called “simple simulation”) or (ii) to produce the provisions of another agreement (concealed transaction) (and this is called “qualified simulation”). The effect of a simulated transaction may be examined differently, depending on whether the simulation is simple or qualified.

In a simple simulation, the apparent transaction is fraudulent; the parties do not intend to make the transaction, and it has no legal consequences. Its invalidity is ex officio taken into account and it can be claimed by anyone, and has no time limit.

In a qualified simulation, the outcome of the apparent transaction is the same as in a simple simulation. For the concealed transaction, it is examined: If the concealed transaction fulfils the validity conditions of that transaction, the transaction is valid; otherwise, a conclusion is made according to the missing validity condition. For instance, if the concealed transaction is subject to compliance with any particular form, it may be invalid due to the absence of the formal requirement.[2]

A typical example, in practice, in this regard is concealing the donation of an immovable property through a simulated sales transaction. In this case, the apparent sales agreement is void because it is simulated, and the concealed donation agreement is also void due to the breach of formal requirement, since it has not been made in compliance with the official form.

The Concept of Simulated Transaction of Legator

A simulated transaction of legator, in fact, is not a different concept from qualified simulation.  The reason it is called this distinctively is that legators quite often resort to simulation to bereave property from its heirs. In general, this simulation occurs as a legator, who would like to deprive his heirs of their inheritance by donating a property in his estate under a sales contract. In this case, as explained, above, the sales contract is void due to simulation and, for the concealed transaction, the validity conditions are examined. For instance, if the concealed transaction is the donation of immovable property, it will be void due to the breach of formal requirement. In the Court of Cassation practices, although it may be argued, in our oppinion that the intention to “deprive his heirs of their inheritance,” is additionally sought in order to deduct a simulated transaction of the legator.[3]

In the decision of The Assembly on the Unification of Judgements of the Court of Cassation dated 1.4.1974 and numbered 1/2 regarding a simulated transaction of a legator, the matters explained above are emphasized:

“It is determined in the second meeting of the Grand General Assembly of the Unification of Judgements of the Court of Cassation dated 1.4.1974 that if a legator, for the purpose of bereaving his heirs of succession rights, declares his will in the direction of sale in front of the land registry official on his immovable property registered in the land registry which he actually wanted to donate, all of the damaged inheritors, whether or not statutorily entitled to the reserved portion, have right to bring an action claiming that the apparent sales agreement is void due to simulation based on Article 18 of the Code of Obligation, and the concealed donation agreement lacks the formal requirement, and this right to bring an action does not affect the rights provided by Articles 507 and 603 of the Civil Code for valid agreements.”

The Decision of the Assembly of Civil Chambers of the Court of Cassation dated 19.02.2019 and numbered 1-479/1178 and Our Assessment

The case that is the subject of the decision of the Assembly of Civil Chambers of the Court of Cassation referred to in the title, is comprised of an example of qualified simulation in which the apparent transaction is sales, and the concealed transaction is donation, such as in the explanations we have made regarding simulations and simulated transactions of a legator. Indeed, in the case at hand, it is argued that while the legator sold an immovable property to his wife (apparent transaction) his real intention was donation (concealed transaction).

The Assembly of Civil Chambers of the Court of Cassation, in the aforementioned decision, has come to the following conclusions:

In light of all of these explanations, in the case at hand that was opened based on the legal reason of simulation, although the immovable propery was transfered to the defendant before the land registry, it is obvious that the real intent of the transfer is not a sale, but a donation, regarding the plea on the amount paid in return for the transfer, and the defendant who does not have ability to pay was the wife of the legator/deceased. As such, even though there is simulation in terms of the Law of Obligations, it is necessary to prove that he acted with the intention to deprive his heirs of inheritance in the transfer transaction.”

The Assembly of Civil Chambers of the Court of Cassation primarily accepts the existence of simulation and then, in compliance with its practices, we repeat that this is quite contestable, has searched for the answer of the question as to“whether this simulated transaction bears the intention to deprive the heirs of inheritance to be acknowledged as invalid,” and decided that this intention could not be proved, and added:

On the other hand, it is clear that on the date of transfer 02.10.2001 the legator, born in 1915, and his wife (the defendant), born in 1928, are quite elderly. Therefore, taking into consideration that there are no other inheritors aside from the common children, it is not possible to evaluate the idea of protecting and securing his life partner, to whom he has been married since 1950, and who has undoubtedly undergone labor and support in the acquisition of the immovable as the intention to deprive his heirs of their inheritance.”

Firstly, we are skeptical of this practice of the Court of Cassation’s attempt to identify the “intention to deprive the heirs of inheritance,” because this practice results in the conclusion that the simulated transaction, since the Assembly of Civil Chambers of the Court of Cassation explicitly accepts in its decision, is a valid transaction, without any legal basis. The issue to be discussed, separately, in this decision is the conclusion made by the Assembly of Civil Chambers of the Court of Cassation regarding the intention to deprive the heirs of their inheritance. The Assembly, after acknowledging that the transaction appeared as a sale, but is in fact a donation transaction, presents the following statements: The legator assigns the property to his wife, in order to “protect and secure his life long partner (possibly from the demands of other heirs),” which means that he has actually acted with the intention to bereave his heirs of their inheritance, knowing that the property belongs to their inheritance portions. It is a very controversial conclusion by the Assembly that there is “no intention to disinherit” while acknowledging the legator’s purpose.

Conclusion

In our opinion, evidently, there will be much debate on the decision of the Assembly of Civil Chambers of the Court of Cassation dated 19.2.2019 and numbered 1-479/1178. As a matter of fact, the aforementioned decision was discussed in the Assembly, as it was made with the majority of votes, 11 votes versus 10 votes.

[1] Oğuzman; Kemal / Öz, Turgut, Istanbul 2016, V. 1, p. 127 vd.

[2] Tercier, Pierre / Pichonnaz, Pascal / Develioğlu, H. Murat: Borçlar Hukuku, Genel Hükümler, Istanbul 2016, p. 182, N. 589.

[3] For an example, see. 1. CC, No. 4755/16648, 19.4.2016; 1. CC, No. 6857/7095, 12.5.2015.