Savings Deposit Ins. Fund of Turkey (Tasarruf Medvuati Sigorta Fonu) v Aksoy
Annotate this CaseDecided on October 10, 2019
Supreme Court, New York County
Savings Deposit Insurance Fund of Turkey (Tasarruf Medvuati Sigorta Fonu), Plaintiff
against
Erol Aksoy, Defendant
601721/2004
For the plaintiff, Savings Deposit Insurance Fund of the Republic of Turkey (Tasarruf Mevduati Sigorta Fonu), Kellner Herlihy Getty & Freidman, LLP, by Douglas A. Kellner, Esq. and Michelle J. Martin, Esq., and Sequor Law, P.A., by Edward H. Davis, Jr., Esq. and Juan J. Mendoza, Esq.
For the defendant, Erol Aksoy, Norton Rose Fulbright US LLP, by Michael A. Samalin, Esq.
Melissa A. Crane, J.
This decision grapples with an aspect attendant to the international enforcement of a judgment, an increasingly common situation in our global economy. The query at issue here, however, appears to be one of first impression: does a judgment in New York that enforces a judgment in Turkey, become unenforceable in New York, if the Turkish judgment subsequently becomes unenforceable in Turkey? Seeking an affirmative answer to that question, defendant Erol Aksoy ("Mr. Aksoy" or "Defendant"), moves pursuant to C.P.L.R. § 5015(a)(5), to vacate orders dated September 30, 2004, July 12, 2005 and June 8, 2008 (collectively, the "New York Judgment"). These orders recognized an April 14, 2003 judgment rendered against Mr. Aksoy in the Republic of Turkey (the "Turkish Decision"), in favor of plaintiff, Savings Deposit Insurance Fund of the Republic of Turkey (Tasarruf Mevduati Sigorta Fonu) ("TMSF" or "plaintiff").
BACKGROUND
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I. The Turkish Judgment and the New York Judgment Enforcing It
On December 24, 1998 and June 8, 1999, Etibank issued a ten million dollar loan and a $1.5 million loan to Iktisat Financial Kiralama ("Iktisat Leasing") respectively, with Mr. Erol Aksoy ("Mr. Aksoy" or "defendant") and Avrupa ve Amerika Holding AS, ("Avrupa"), as [*2]guarantors on both of the loans (the "Guarantors") (NY St Cts Elec Filing ["NYSCEF"] Doc No. 19, p. 7). On December 27, 2000, TMSF took control of Etibank under authority from the Turkish Banking Act (NYSCEF Doc No. 13, p. 2, Pismisoglu Aff). Then, on March 15, 2001, TMSF took over Iktisat Bankasi ("Iktisat Bank"), the primary shareholder of Iktisat Leasing, resulting in TMSF being in control of both the creditor, Etibank, and the debtor, Iktisat Leasing (NYSCEF Doc No. 19, p. 7).
The Guarantors failed to make good on the loans. Accordingly, TMSF, acting through Etibank, initiated enforcement procedures before the 14th Bailiff's Office of Istanbul ("14th BOI") against Iktisat Leasing, Mr. Aksoy, and Avrupa (collectively the "Turkish Defendants") on September 11, 2001 under Turkish Enforcement File No. 2001/17954 (the "File") (NYSCEF Doc No. 19, p. 8). Mr. Aksoy then filed an objection to the enforcement proceedings, per Article 62 of the Enforcement Code, causing suspension of the enforcement (NYSCEF Doc No. 12, p. 4). TMSF responded by filing a "Cancellation Action" to annul defendant's objection with the First Commercial Court of Istanbul under File No. 2001/2026 (NYSCEF Doc No. 19, p. 4-5).
On April 14, 2003, the First Commercial Court of Istanbul ruled for TMSF in the Turkish Action under Decision No. 2003/04 ("Turkish Judgment") (NYSCEF Doc No. 20, The Judgment of the First Commercial Court of Istanbul). The court partially annulled the Turkish Defendants' objections against enforcement proceedings and found the principal debt amount to be $9,789,745 (Id. at 3). Because of the Turkish Judgment, Mr. Aksoy and Avrupa owed TMSF the principal debt, plus penalties and interest under Turkish law. Moreover, TMSF had permission to continue enforcement proceedings on File No. 2001/17954 in order to collect this debt (Id. at 3-4).
The Turkish Judgment was served on the Turkish Defendants on July 15, 2003, and on TMSF on July 29, 2003 (NYSCEF Doc No. 19, p. 8). None of the parties in the Turkish Action filed an appeal. Thus, the Turkish Judgment became final as of September 30, 2003 (Id. at 9). On May 25, 2004, the 14th BOI issued a receipt for 80,000,000 TL (Approximately $52 USD) regarding File No. 2001/17954 (NYSCEF Doc No. 85).
On July 5, 2004, the File was archived or "struck off" by the 14th BOI (NYSCEF Doc No. 54). However, it was not until 2014 that Mr. Aksoy's counsel in Turkey, Selda Cicek Basturk ("Ms. Basturk"), learned about the archiving, when she made an official request to the 14th BOI regarding the File (NYSCEF Doc No. 53, p. 1; NYSCEF Doc No. 18, p. 9).
Meanwhile, on June 7, 2004, TMSF filed an action in New York Supreme Court under Index No. 601721/2004, requesting the Court to recognize the Turkish Judgment and attach Mr. Aksoy's New York property as security. Mr. Aksoy vigorously opposed this lawsuit. On September 30, 2004, the New York Court recognized that the Turkish Judgment was "final, conclusive, and enforceable in Turkey," that no grounds for non-recognition existed, and granted TMSF's request for an attachment. (Id. at 7-8). On June 8, 2005, the Court granted TMSF's motion for summary judgment, denied Mr. Aksoy's cross-motion to renew his request for a stay of the enforcement proceedings and rendered judgment against Mr. Aksoy (Id. at 1, 5-6). On July 12, 2005, the Clerk of the Court entered this judgment against Mr. Aksoy in favor of TMSF in the amount of $11,661,681.09 (NYSCEF Doc No. 16, p. 2).
II. After the New York Judgment
In 2018, Ms. Basturk requested certified copies of the 14th BOI's record stating Enforcement File 2001/17954 had been struck off on July 5, 2004 (NYSCEF Doc No. 18, p. 9). On July 11, 2018, the 14th BOI responded with a document it had not provided in 2014 (Id. at 9-[*3]10). That document stated the Unit Archive Cleaning and Disposal Commission, a Turkish governmental body, had ordered the destruction of the long-inactive Enforcement File pursuant to Turkish law as of June 2, 2011 (Id. at 9). This is when Ms. Basturk and Mr. Aksoy first learned that the File had been destroyed (Id.).
On August 21, 2018, TMSF filed a special proceeding under CPLR § 5225(b) to enforce the New York Judgment against Searock Holdings LLC (owned by Mr. Aksoy's two adult children) ("Searock"), 130 East 63rd Owners Corporation, and Mr. Aksoy (Savings Deposit Insurance Fund of Turkey [Tasarruf Mevduati Sigorta Fonu] v. Searock Holdings LLC, et al., No. 157793/2018 [Sup. Ct., New York Cty., Aug. 21, 2018]; NYSCEF Doc No. 18, p. 10).
DISCUSSION
Mr. Aksoy now moves to vacate the New York Judgment on the grounds that the Turkish Judgment is no longer valid or enforceable. Mr. Aksoy does not dispute that this Court previously decided the Turkish Judgment was a money judgment that was "final, conclusive, and enforceable in the Republic of Turkey" and therefore qualified for recognition under CPLR Article 53 (NYSCEF Doc No. 95, p. 13). Rather, Mr. Aksoy contends that the Destruction Order, rendered after the New York Judgment, has sufficiently undone the Turkish Judgment to justify vacatur of the New York Judgment under CPLR 5015(a)(5) (Id.).
Pursuant to CPLR 5015(a)(5), the "court which rendered a judgment or order may relieve a party from it upon such terms as may be just, on motion of any interested person" on the ground of "reversal, modification or vacatur of a prior judgment or order upon which it is based" (see also Nash v Port Authority, 22 NY3d 220 [2013]). CPLR § 5015(a)(5) allows a motion to vacate the New York Judgment based on a change in the status of the underlying Turkish Judgment. "The change may have come about by a direct reversal or modification of the earlier judgment on appeal, or a modification or vacatur of the earlier judgment by the rendering court itself" (NY CPLR § 5015 [McKinney]).
A. Enforcement in Turkey
In Turkey, creditors can initiate Enforcement Proceedings as an alternative to filing a court action for debt collection by simply making a request of the Enforcement Office (NYSCEF Doc No. 78, p. 3-4, EBL Article 58 Appendex 2). Within three days following the submission of the enforcement request, the Execution Office is supposed to issue a payment order and serve it upon the debtor (Id. at 4, EBL Article 60 and 61, Appendix 3). Once served, the debtor has seven days to make an objection to the payment order (Id., EBL Article 62, Appendix 4; NYSCEF Doc No. 42, p. 4, Footnote 2). If there is no objection, the debtor must pay the amount requested or declare property to satisfy the payment order (NYSCEF Doc No. 78, p. 4, EBL Article 62, Appendex 4). The debtor who wishes to raise an objection does so by notifying the Enforcement Office with a petition or orally (NYSCEF Doc No. 42, p. 4, Footnote 3, EBL Article 62/I, c.I). The objection suspends the enforcement proceedings until the objection is lifted (Id., Footnote 2, Article 66/I, c.1; NYSCEF Doc No. 78, p. 4, EBL Article 66, Appendix 5).
In order to lift the objection, the creditor may file: (1) an action to lift the objection under [*4]special circumstances,[FN1] before the Enforcement Courts within six months (EBL Article 68 and 68/A, Appedix 6), or (2) a cancellation action annulling the objection before Civil (Commercial) Courts, within one year of the notification of the debtor's objection (NYSCEF Doc No. 78, p. 4, EBL Article 67, Appendix 7; NYSCEF Doc No. 42, p. 4, Footnote 3). In a cancellation action, the court will conduct an examination of the merits of a case and decide the amount a debtor owes, if any, and whether to continue the execution proceedings against the debtor. (NYSCEF Doc No. 94, p. 3). If the court annuls the objection, the debtor's objection to the payment order on the enforcement file is eliminated (NYSCEF Doc No. 42, p. 4, ¶ 8). After the objection is removed, the creditor may continue with enforcement to recover the principal debt by submitting the court's decision to the Enforcement Office (NYSCEF Doc No. 42, p. 5, Footnote 5, 12th Civil Chamber, May 29, 2012, E. 2012/2190, K. 2012/18295).
"The right to request attachment expires in a year that passes from the date of the service of the payment order. In case of an objection or action, the time that elapses from the time the objection or action takes place until the decision becomes absolute, or in case the creditor and debtor make installment agreements at the enforcement office, the time that elapsed until the breach of the installment agreement is not taken into account" (NYSCEF Doc No. 23, p.3, Article 78: Amended paragraph 2: 3222 — 6.6.1985/a.9). "If the annulment or removal decision is given in the presence of the debtor, this term begins with the pronouncement of the decision" (Id. at 2, EBL Article 75). Further, an appeal does not stop the enforcement of the court's decision (NYSCEF Doc No. 42, p.7, CCP at 350[1]) and a decision does not need to become final before a creditor can resume enforcement (NYSCEF Doc No. 19, p. 9). If a creditor does not request attachment of the debtor's assets within the prescribed one-year period, the [enforcement] file will be shelved" (NYSCEF Doc No. 76, p. 7, EBL Article 78/II).Requesting attachment after the one-year statutory period is dependent on the delivery of the creditor's renewal request to the debtor (NYSCEF Doc No. 19, 12; NYSCEF Doc No. 23, p. 3, Article 78). The creditor may renew the execution file anytime within the statute of limitations. Once the execution file is renewed, it automatically becomes active and the creditor then is entitled to request attachment of the debtor's assets (NYSCEF Doc No. 76, p. 7, ¶ 18, EBL Article 78, V). Unless otherwise provided by law, every receivable is subject to a ten-year statute of limitations (NYSCEF Doc No. 22, p.1, Article 146). Further, "the statute of limitations applicable to proceedings based on a court decision is ten years as of the last action" (EBL at 39/I). The statute of limitations can be interrupted, resulting in a new ten-year period, if the debtor has acknowledged the debt, or if the debt is acknowledged by a deed, awarded by a court, or awarded by an arbitral order.
The Turkish Judgment was declared on April 14, 2003, and none of the parties appealed. Thus, it became final on September 30, 2003 (NYSCEF Doc No. 42, p. 7, ¶ 14). The one-year statutory period began on April 14, 2003. Therefore, TMSF had to return to the 14th BOI with a copy of the Turkish Judgment by April 14, 2004 in order to resume enforcement proceedings on the File. After April 14, 2004, as long as the ten-year statute of limitations was not interrupted, [*5]TMSF had until April 14, 2013 to file a renewal and continue enforcement proceedings.
In 2011, Article 598 of the Turkish Code of Obligations retroactively established that individual sureties are valid for a maximum period of 10 years, beginning from the moment of the surety contract (NYSCEF Doc No. 19, p. 15-6). Accordingly, pursuant to Article 598 of the Turkish Code, Mr. Aksoy's obligation in Turkey as a guarantor expired on December 4, 2008 regarding the $10m loan, and on June 8, 2009 regarding the $1.5m loan (Id.).
B. The Effect of The Shelving of the File that Mr. Aksoy discovered in 2014
Thus, although on July 5, 2004, the File was archived or "struck off" by the 14th BOI, TMSF could have returned to the enforcement office anytime up until April 14, 2013 and renewed the File to commence enforcement. Accordingly, although the File was shelved, it could have been enforceable at the time the New York court rendered the New York Judgment on June 8, 2005. Moreover, Mr. Aksoy certainly could have moved to vacate the New York judgment years ago based on the shelving of the File in Turkey. Therefore, the shelving of the File is not grounds to vacate the New York Judgement.
C. Effect of the Destruction of the Execution File
On June 2, 2011, a commission of the Turkish Ministry of Justice issued a decision ordering the destruction of the File, and the Archives Unit Cleaning and Destruction Commission ordered the file destroyed. This resulted in TMSF no longer being able to renew the File, and as such, enforcement upon the underlying Turkish Judgment is no longer possible in Turkey (NYSCEF Doc No. 12, p. 5, ¶ 15; NYSCEF Doc No. 18, p. 11, 19; NYSCEF Doc No. 19, 14-5; NYSCEF Doc No. 94, p. 21).
Mr. Aksoy argues that the Turkish Judgment has been effectively modified, vacated, reversed or otherwise undone by: (1) the "striking off" and subsequent destruction of the Enforcement File; (2) the lapsing of the applicable period of effectiveness of the Turkish Decision; and (3) the expiration of the validity period for the sureties underlying the Turkish Decision. For these reasons, defendant contends the New York Judgment should be vacated under CPLR § 5015(a)(5) or the Court's inherent authority in the interests of justice, so it has no greater effectiveness than the underlying Turkish Judgment upon which is based.
New York policy is to recognize foreign judgments promptly, without revising the foreign judgment (CIBC Mellon Tr. Co. v. Mora Hotel Corp. N.V., 100 NY2d 215, 217, 792 N.E.2d 155 [2003]). Under CPLR Article 53, when the Court performs the ministerial function of recognizing a foreign country money judgment, it is then converted into a New York judgment that is separate from the underlying foreign judgment (CIBC Mellon Tr. Co. v. Mora Hotel Corp. N.V., 100 NY2d 215, 222, 792 N.E.2d 155 [2003]; citing Lenchyshyn v Pelko Elec., 281 AD2d 42, 49 [4th Dept 2001]).
Here, the New York court determined the question of enforceability in Turkey back in 2004 and 2005. At the time of the New York Judgment, TMSF was able to enforce the Turkish Judgment by renewing the file at the 14th BOI. Therefore, TMSF could seek enforcement of the Turkish Judgment in New York. TMSF's inability to enforce the judgment almost fifteen years later in Turkey, because the statute of limitations to enforce in Turkey has run, is not equivalent to vacating, reversing, or modifying a court's valid decision (see Cadles of Grassy Meadow II, L.L.C. v Lapidus, 2011 WL 12627510 at *4 (NY Sup. Ct. New York County October 6, 2011]["where a judgment was rendered in a sister state and remained valid and enforceable at the time that it was registered in New York, it is enforceable within this State for at least twenty [*6]years pursuant to CPLR 211(b) and is no longer subject to the time limitations of the original state of the judgment"]). The destruction of the File was merely due to inactivity on the File and the passage of time. That inactivity was because of Petitioner's conscious choice to enforce the Turkish Judgment in New York. The New York court already held in 2005 that the proceedings in Turkey resulted in a judgment that was enforceable in New York. Res judicata precludes Mr. Aksoy from arguing otherwise now (in re Hunter, 4 NY3d 260,269 [2005]).
Accordingly, it is
ORDERED that defendant's motion to vacate the New York Judgment under CPLR §5015(a)(5) is denied.
Dated: October 10, 2019
New York, New York
_______________________________
JSC Footnotes
Footnote 1:E.g. if creditor has the documents listed under Article 68/A of the EBL that prove the existence of the debt (NYSCEF Doc No. 78, p. 4, Footnote 2)
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