What is a Fiduciary Agreement?

Fiduciary agreements are contracts where a person transfers their property or right to another person to create security or for another purpose, with the aim of receiving it back upon the fulfillment of that purpose. Through a fiduciary agreement, security is provided without resorting to a simulated transaction.

As a general rule, a fiduciary agreement is not subject to any formal requirement. However, if a fiduciary agreement is made concerning a transaction that is subject to a written form requirement, such as the transfer of immovable property, it will also be subject to the written form requirement. Supreme Court decisions have also stated that fiduciary agreements are subject to the written form requirement. Supreme Court decisions indicate that if there is a document in the nature of a written evidentiary beginning, the fiduciary agreement can be proven by witness testimony and other evidence. Documents in the nature of a written evidentiary beginning are those that, while not fully proving the alleged fact, provide an impression that the allegations might be true. In the absence of such documents, it is not possible to prove a fiduciary agreement except through conclusive evidence such as an oath or admission.

What is the Statute of Limitations for Fiduciary Transactions?

Claims based on fiduciary transactions are subject to the general statute of limitations period of 10 years. The statute of limitations period begins to run from the date when the obligation to return becomes due and payable, i.e., when the property subject to the fiduciary agreement is required to be returned.

Can a Fiduciary Transaction Between Siblings Be Proven by Witness Testimony?

There is no legal impediment to concluding a fiduciary agreement between siblings. However, for the purpose of proving the relationship, the established requirement of a written evidentiary beginning in Supreme Court jurisprudence is also sought in close family relationships such as siblings. Transactions between siblings and close relatives constitute an exception to the requirement of proof by deed. Although many Supreme Court decisions have included dissenting opinions stating that fiduciary transactions between siblings can be proven by witness testimony, this view is not adopted by the majority members. Therefore, for disputes arising from fiduciary agreements made between siblings and close relatives, proof by witness testimony is only possible if there is a document in the nature of a written evidentiary beginning.

Which Court Has Jurisdiction in a Title Cancellation and Registration Lawsuit Based on a Fiduciary Agreement?

A title cancellation lawsuit based on a fiduciary agreement must be filed in the Civil Court of First Instance located where the immovable property is situated.

Is There a Difference Between Fiduciary Transaction and Sham Transaction Lawsuits?

Since fiduciary agreements are not explicitly regulated by law, transfer transactions cannot be made in the land registry based on a fiduciary agreement. For this reason, fiduciary agreements are shown as sales in the land registry, and the transaction constitutes a sham. In a title cancellation lawsuit, if the existence of a fiduciary agreement is proven, the apparent sales transaction will be deemed simulated. Therefore, similar to lawsuits for fraudulent conveyance of assets to avoid inheritance, the ground for cancellation is based on simulation.

Supreme Court Decisions on Fiduciary Agreements

14th Civil Chamber, File No. 2011/2131, Decision No. 2011/4330, Dated 04.04.2011

“There is no written fiduciary agreement, nor is there any evidence in the nature of a written evidentiary beginning. In such cases, even if the parties are siblings, witness testimony cannot be heard. Pursuant to Article 289 of the Code of Civil Procedure (HUMK), 'In matters requiring proof by deed pursuant to Article 288, witness testimony may be heard if the opposing party explicitly consents, after reminding them of the above provisions.' The plaintiff relied on 'all kinds of legal evidence' in the petition but did not mention an oath in the evidence list dated 22.10.2008. Since the plaintiff could not prove their case, the request for title cancellation and registration should be dismissed.”

1st Civil Chamber, File No. 2016/12114, Decision No. 2019/4759, Dated 23.09.2019

“Regarding the concrete case, although the court decided to dismiss the lawsuit; it is understood that ... whose signature is on the document titled 'fiduciary agreement' dated 01.10.2007, signed between the plaintiff and non-party ..., was heard as a witness for the plaintiff. In his statement, he admitted his signature and stated that the transaction between him and the plaintiff was a fiduciary transaction, that he did not pay any consideration, and that his sole purpose was to receive and return as a trust. Therefore, there is no doubt that there was a fiduciary transaction between the plaintiff and non-party .... It is also understood that non-party ..., who acquired the property from ..., is the plaintiff's son; non-party ..., who acquired the property from ..., is the plaintiff's and defendant's niece; and defendant ..., who acquired the property from ..., is the plaintiff's brother. Thus, it is clear that the defendant was in a position of knowing or ought to have known about the fiduciary transaction and cannot benefit from the protection of Article 1023 of the Turkish Civil Code. Under these circumstances, instead of accepting the lawsuit, rendering a decision as written with an erroneous assessment is incorrect.”

4th Civil Chamber, File No. 2021/15002, Decision No. 2021/7594, Dated 26/10/2021

“The immovable property subject to the lawsuit was sold by the defendant debtor to the defendant third party ... on 18.02.2014. The defendant ... stated that the immovable property previously belonged to him, and due to his cousin ...'s need for money, a loan was taken from the bank by showing a sale to the debtor on 30.04.2008, and he re-acquired the property on 14.02.2018 when the loan debt was repaid, presenting a written fiduciary agreement dated 30.04.2008. For a fiduciary agreement to be valid, it is sufficient for it to be in writing; it does not need to be in official form. It has been documented that, supporting the written document, a loan was taken from Yapı ve Kredi Bank on 01.05.2008, a mortgage was placed on the immovable property, the loan taken out was delivered to the defendant ... from the debtor's bank records, and the loan debt was repaid by a company belonging to the third party's relative ... regularly sending money to the debtor's account. With this written collateral evidence, the conditions of proof requiring the fiduciary agreement to be binding on third parties have been met. In this case, since it has been proven that the transfer to the defendant ... was not for the purpose of asset concealment, instead of dismissing the lawsuit with respect to this defendant, rendering a decision as written with an erroneous assessment is contrary to procedure and law.”

1st Civil Chamber, File No. 2021/8202, Decision No. 2022/3242, Dated 19/04/2022

“Regarding the parcel numbered 3 immovable property, the 10-year preclusive period specified in Article 12/3 of the Cadastre Law No. 3402 has passed. Regarding the parcel numbered 4 immovable property, the plaintiff could not prove their fiduciary transaction claim by written evidence pursuant to the Unification of Jurisprudence Decision dated 05.02.1947 and numbered 20/6. Furthermore, considering that the issue of attorney's fees, which is not related to public order and was not appealed, cannot be brought before the Court of Cassation, there is no error in rendering the judgment as written.”

1st Civil Chamber, File No. 2021/10653, Decision No. 2022/2378, Dated 23/03/2022

“Although the legal ground of the lawsuit was characterized by the Court of First Instance as the invalidity of the legal transaction due to wrongful registration; in light of the manner in which the claim was put forward, party statements, and the content of the case file, the lawsuit relates to a claim for compensation based on fiduciary transaction and fraud legal grounds. Considering that the plaintiff did not present written evidence or a written evidentiary beginning regarding the fiduciary transaction, nor did they rely on the evidence of oath in the petition, it is clear that the plaintiff could not prove their claim.”

7th Civil Chamber, File No. 2021/2241, Decision No. 2022/1107, Dated 16/02/2022

“Regarding the concrete case; the court accepted the bank receipt sent from the bank as a written evidentiary beginning, and the lawsuit was accepted by hearing witness testimony despite the absence of the required contract for proving the claim. However, as stated above, for a document to be accepted as a written evidentiary beginning, it must originate from the adversary (be their product), not from a third party. Therefore, it is not possible to accept bank receipts as a written evidentiary beginning. Consequently, the case cannot be resolved by resorting to witness testimony. However; the plaintiff also relied on the evidence of oath in the petition and the evidence list. First, this right should be reminded to the plaintiff, and the issue of whether a fiduciary transaction exists should be considered based on the oath to be administered to the defendant, who is a party to the fiduciary transaction.”

1st Civil Chamber, File No. 2021/2530, Decision No. 2022/1236, Dated 16/02/2022

“Considering that the power of attorney and the revocation of power of attorney are not in the nature of a written evidentiary beginning, and there is no written evidence or document in the nature of a written evidentiary beginning within the case file, and for these reasons, witness testimony cannot be heard to prove the fiduciary transaction claim, there is no error in rendering the judgment as written.”

For any questions you may have regarding fiduciary agreements, please use the section below.

Av. Mehmet Yücesoy

İzmir Attorney & Legal Consultancy