Supreme Court, New York County, October 10, 2019

Norton Rose Fulbright US LLP (Michael A. Samalin of counsel) for defendant.

Kellner Herlihy Getty & Freidman, LLP (Douglas A. Kellner and Michelle J. Martin of counsel) and Sequor Law, P.A. (Edward H. Davis, Jr. and Juan J. Mendoza of counsel) for plaintiff.

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 CPLR 5015 (a) (5) to vacate orders dated September 30, 2004, June 8, 2005, and July 12, 2005 (collectively, the New York judgment). These orders recognized an April 14, 2003 judgment rendered against Mr. Aksoy in the Republic of Turkey (the Turkish judgment), in favor of plaintiff, Savings Deposit Insurance Fund of the Republic of Turkey (Tasarruf Mevduati Sigorta Fonu) (TMSF or plaintiff).

I. The Turkish Judgment and the New York Judgment Enforcing it

On December 24, 1998, and June 8, 1999, Etibank issued a $10 million loan and a $1.5 million loan to Iktisat Financial Kiralama (Iktisat Leasing) respectively, with Mr. Aksoy 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 at 7). On December 27, 2000, TMSF took control of Etibank under authority from the Turkish Banking Act (NYSCEF Doc No. 13, Pismisoglu aff at 2). Then, on March 15, 2001, TMSF took over Iktisat Bankasi, the primary shareholder of Iktisat Leasing, resulting in TMSF being in control of both{**66 Misc 3d at 182} the creditor, Etibank, and the debtor, Iktisat Leasing (NYSCEF Doc No. 19 at 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 at 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 at 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 at 4-5).

On April 14, 2003, the First Commercial Court of Istanbul ruled for TMSF in the Turkish action under decision No. 2003/04 (Etibank Anonim Sirketi [Tasarruf Mevduati Sigorta Fonu] v Iktisat Finansal Kiralama Anonim Sirketi, First Commercial Ct of Istanbul, Apr. 14, 2003, file No. 2001/2026; NYSCEF Doc No. 20 [Turkish judgment]). 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 at 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, learned about the archiving, when she made an official request to the 14th BOI regarding the file (NYSCEF Doc Nos. 53 at 1; 18 at 9).

Meanwhile, on June 7, 2004, TMSF filed an action in New York Supreme Court under index No. 601721/2004, requesting{**66 Misc 3d at 183} 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, and that no grounds for non-recognition existed, and granted TMSF's request for an attachment (NYSCEF Doc No. 14 at 7-8 [emphasis added]). 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 (NYSCEF Doc No. 15 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 at 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 at 9). On July 11, 2018, the 14th BOI responded with a document it had not provided in 2014 (id. at 9-10). 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), 130 East 63rd Owners Corporation, and Mr. Aksoy (Savings Deposit Ins. Fund of Turkey [Tasarruf Mevduati Sigorta Fonu] v Searock Holdings LLC, Sup Ct, NY County, index No. 157793/2018; NYSCEF Doc No. 18 at 10).

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 at 13). Rather, Mr. Aksoy contends that the destruction order, rendered after the New York judgment, has sufficiently undone the Turkish judgment{**66 Misc 3d at 184} 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 Auth. of N.Y. & N.J., 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" (David D. Siegel, Practice Commentaries, McKinney's Cons Laws of NY, CPLR C5015:10).

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 (Turkish Enforcement and Bankruptcy Law [EBL] art 58 Appendix 2; NYSCEF Doc No. 78 at 3-4). 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 (EBL arts 60, 61 Appendix 3; NYSCEF Doc No. 78 at 4). Once served, the debtor has seven days to make an objection to the payment order (EBL art 62 Appendix 4; NYSCEF Doc Nos. 78, 42 at 4 n 2). If there is no objection, the debtor must pay the amount requested or declare property to satisfy the payment order (EBL art 62 Appendix 4; NYSCEF Doc No. 78 at 4). The debtor who wishes to raise an objection does so by notifying the Enforcement Office with a petition or orally (EBL art 62/I, c.I; NYSCEF Doc No. 42 at 4 n 3). The objection suspends the enforcement proceedings until the objection is lifted (EBL arts 66/I, c.1; 66 Appendix 5; NYSCEF Doc Nos. 42 at 4 n 2; 78 at 4).

In order to lift the objection, the creditor may file: (1) an action to lift the objection under special circumstances,^[FN*] before the enforcement courts within six months (EBL arts 68, 68/A Appendix 6), or (2) a cancellation action annulling the objection before civil (commercial) courts, within one year of the notification{**66 Misc 3d at 185} of the debtor's objection (EBL art 67 Appendix 7; NYSCEF Doc Nos. 42 at 4 n 3; 78). 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 at 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 at 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 (Turkish Sup Ct, 12th Civ Chamber, May 29, 2012, E. 2012/2190, K. 2012/18295; NYSCEF Doc No. 42 at 5 n 5).

"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" (EBL art 78, amended para 2:3222-6.6.1985/a.9; NYSCEF Doc No. 23 at 3).

"If the annulment or removal decision is given in the presence of the debtor, this term begins with the pronouncement of the decision" (EBL art 75; NYSCEF Doc No. 23 at 2). Further, an appeal does not stop the enforcement of the court's decision (Turkish Code of Civil Procedure at 350 [1]; NYSCEF Doc No. 42 at 7) and a decision does not need to become final before a creditor can resume enforcement (NYSCEF Doc No. 19 at 9). "[I]f a creditor does not request attachment of the debtor's assets within the prescribed one-year period, the [enforcement] file will be shelved" (EBL art 78/II; NYSCEF Doc No. 76 at 7).

Requesting attachment after the one-year statutory period is dependent on the delivery of the creditor's renewal request to the debtor (EBL art 78; NYSCEF Doc Nos. 19, 12, 23 at 3). 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 (EBL art 78, V; NYSCEF Doc No. 76 at 7, ¶ 18). Unless otherwise provided by law, every receivable is subject to a 10-year statute of limitations (Turkish Code of Obligations art 146; NYSCEF Doc No. 22 at 1). Further, "the statute of limitations applicable to {**66 Misc 3d at 186}proceedings based on a court decision is ten years as of the last action" (EBL art 39/I). The statute of limitations can be interrupted, resulting in a new 10-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 at 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 10-year statute of limitations was not interrupted, 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 at 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 $10 million loan, and on June 8, 2009, regarding the $1.5 million 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 judgment.

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 Nos. 12 at 5, ¶ 15; 18 at 11, 19; 19 at 14-5; 94 at 21).{**66 Misc 3d at 187}

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 Trust Co. v Mora Hotel Corp., 100 NY2d 215, 221 [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 Trust Co. v Mora Hotel Corp., 100 NY2d 215, 222 [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 15 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 NY Slip Op 34159[U], *7 [Sup Ct, NY County, Oct. 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 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 plaintiff'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 (Matter of Hunter, 4 NY3d 260, 269 [2005]).{**66 Misc 3d at 188}

Accordingly, it is ordered that defendant's motion to vacate the New York judgment under CPLR 5015 (a) (5) is denied.