The Responsibility of the Avalist: Recourse Actions Between Debtors in Practice

Entrance

In commercial law, negotiable instruments are tools that ensure the security and speed of commercial transactions. Among these documents, bills of exchange, promissory notes, and checksare the most commonly used negotiable instruments in economic life. One of the most important institutions that increases the reliability of negotiable instruments the endorsement (aval).

Aval is the act of a third party guaranteeing the debtor of a negotiable instrument. However, unlike a classic guarantee agreement, aval is an independent undertaking. Therefore, the avalist (the person giving the aval)is directly liable if the debtor fails to pay.

In practice, it is common for the guarantor to file a recourse action against the other debtors after paying the debt

---

Legal Nature of Aval

Definition

Aval is a special type of security in negotiable instruments that guarantees the debtor's payment of the debt and is regulated in Articles 700-702 of the Turkish Commercial Code.

Features

• Aval is an independent guarantee.
• The guarantor's liability is independent of the principal debt.
• A guarantee is subject to formal requirements; the word "aval" or a similar expression must be written on the promissory note, and the guarantor's signature must be present.

The Difference from a Guarantee

• In suretyship, the defenses of the debtor also apply to the surety.
• In the case of an aval (guarantee), the debtor's defenses do not bind the avalier (except for exceptions).
• Therefore, aval provides a stronger guarantee in commercial relations.

---

The Responsibility of the Avalist

Scope

The guarantor is liable for the debt of the person to whom they have guaranteed (drawer, payee, endorser).

• The guarantor's liability is the same as the debtor's debt for which they provide security.
• The guarantor is liable for the entire debt; partial guarantee is possible but must be clearly stated.

Rights of the Holder

• The holder can apply directly to the guarantor.
• The avalist has no right to raise the defense of "go to the debtor first.".
• The Court of Cassation interprets the guarantor's liability quite strictly.

---

The Right of Recourse and Its Significance in Practice

After paying the debt, the avalist may seek recourse from the original debtor or other responsible parties for the amount paid.

Grounds for the Right of Recourse

• Turkish Commercial Code Article 702: After paying the debt, the guarantor has the right of recourse, just like other liable parties who have paid the debt.
• Turkish Code of Obligations, Article 596: A person who pays another's debt becomes subrogated to the creditor's rights.

Parties to the Recourse Action

• Plaintiff: Avalist
• Defendant: The original debtor (drawer or payee) or other endorsers who should share the debt.

Subject of the Recourse Action

• The amount paid by the guarantor for the check, promissory note, or bill of exchange
• Interest and expenses
• Any penalties paid

---

Liability of the Avalist and Recourse Cases in Supreme Court Decisions

• The 11th Civil Chamber of the Supreme Court of Appeals, Case No. 2016/7891, Decision No. 2017/2345:
  “An aval is an independent undertaking. The guarantor cannot assert the existence of the debt. The right of recourse exists after the debt has been paid.”
• The 19th Civil Chamber of the Supreme Court of Appeals, Case No. 2018/4562 E., Decision No. 2019/8732 K.:
  “The guarantor may seek recourse from the principal debtor for the amount paid; however, a different assessment may be made if the guarantee was given in bad faith.”
• Supreme Court Grand Chamber, Case No. 2020/321 E., Decision No. 2021/654 K.:
  “The guarantor's liability is limited to the debt for which they provided security. However, if the debt is not paid, the holder may directly claim against the guarantor.”

---

Problems Encountered in Practice

1. Confusing Aval with Guarantee: In practice, many debtors make unfair defenses by assuming that aval is the same as a guarantee.
2. Misuse of the Right of Recourse: Guarantors often encounter statute of limitations issues because they fail to exercise their right of recourse in a timely manner after paying the debt.
3. Insufficient Documentation: In a recourse action, the guarantor must prove that payment was made; bank statements or the return of the original promissory note are important evidence.
4. Claiming Reimbursement from Multiple Debtors: The Avalist can seek recourse from all debtors for the amount paid; however, proving the proportions of liability can be problematic.

---

Strategic Importance

From the perspective of the pregnant woman

• A guarantee constitutes a strong security for the holder.
• The holder can collect their receivables by directly applying to the guarantor.

From the Avalist's Perspective

• Providing a guarantee is a serious commitment; the debtor's ability to pay must be thoroughly investigated.
• Filing a recourse lawsuit after payment has been made prevents the loss of rights.

From the Debtor's Perspective

• Since the guarantor becomes liable when the principal debtor fails to pay the debt, they face additional obligations through recourse lawsuits.

---

Proposed Solutions

• The guarantee undertaking must be given consciously.
• To facilitate proof in recourse lawsuits, documentation of payments should be made mandatory.
• Uniformity in practice should be ensured in line with the precedents of the Supreme Court.
• The aval system for electronic negotiable instruments needs to be regulated securely.

---

Conclusion

Aval is an independent type of guarantee that increases confidence in negotiable instruments. The avalist is held directly responsible if the debtor fails to pay the debt. However, after paying the debt, the right to file a recourse action .

The Supreme Court's rulings strictly interpret the guarantor's liability, developing precedents to protect the holder of the bond. However, in order for the guarantor to recover the amount paid, they must act in accordance with the procedure and fulfill the burden of proof in recourse actions.

In conclusion, aval is of strategic importance for the holder, the debtor, and the guarantor. If not used correctly, the guarantor inevitably faces heavy liabilities.

Gozdenur Turna