The re-endorsement of a check to the drawer is a common, yet legally controversial, issue in negotiable instruments practice. In this situation, does the liability of previous endorsers continue? Or does a new chain of liability begin with the instrument re-endorsed by the drawer? This article seeks to answer this question and explains two fundamental approaches in light of decisions from different chambers of the Court of Cassation.
A. Prevailing View: The Liability of Previous Endorsers Ceases on a Check Re-endorsed to the Drawer
Prevailing view: The liability of previous endorsers ceases: The prevailing view is that the liability ceases. The vast majority of the Court of Cassation’s practice holds that when a check is re-endorsed to the drawer and re-circulated by the drawer, the liability of the payee and endorsers prior to this transaction, referred to as “second circulation”, is extinguished. This view has been shaped particularly by the settled jurisprudence of the 12th Civil Chamber of the Court of Cassation and adopted by numerous first instance and regional appellate courts.
The fundamental premise of this view is the assumption that once the drawer reacquires the check, they return to their original position as if they had never issued that check. Consequently, a new circulation process begins, and the chain of liability is formed within this new process.
B. Counterview: The Liability of Previous Endorsers Continues
Counterview: Liability Continues : Although a minority view, decisions by the 11th and 19th Civil Chambers of the Court of Cassation particularly state that the re-endorsement of a check to the drawer does not extinguish the liability of previous endorsers. This view is based on the fundamental principles of negotiable instruments, namely “joint and several liability of endorsers” and “independence of signatures” . Accordingly, as long as an endorser’s signature remains on the instrument and is not cancelled, their liability to the legitimate holder of the instrument continues.
Legal Bases for the View That Liability Ceases
Decisions supporting this view are based on an almost standardized reasoning. As reiterated in many decisions of the 12th Civil Chamber of the Court of Cassation: “If a check is drawn by the drawer in favor of the payee, and after being issued, it is re-endorsed by the payee back to the drawer, and the drawer then re-introduces the check into circulation by endorsing it under the conditions of Article 788 of the Turkish Commercial Code No. 6102, the payee’s liability from the period before the second circulation is extinguished, and thus, no legal action can be taken against the payee.” (See. Court of Cassation 12th Civil Chamber – 2013/12196 File No.; Court of Cassation 12th Civil Chamber – 2019/477 File No.; Court of Cassation 12th Civil Chamber – 2020/1441 File No. and numerous similar decisions).
The basic logic of this approach can be summarized as follows: Return to the Drawer’s Original Position: When the drawer reacquires the check through endorsement, it is considered as if the check was never put into circulation. The drawer “has returned to the situation before issuing the check”.
Merger of Creditor and Debtor Qualities: With the return of the check to the drawer, who is in the position of the debtor, the credit and debt relationship ends. When the payee endorses the check back to the drawer, the credit-debt relationship between the plaintiff (payee and first endorser) and the drawer has ended.
The drawer reintroducing the check into circulation initiates a new chain of responsibility. In this case, the responsibility remains only “between the drawer and the subsequent creditor holder” (See. Court of Cassation 12th Civil Chamber – 2020/4150 E.).
Legal Grounds for the View that Responsibility Continues
The 11th and 19th Civil Chambers of the Court of Cassation, adopting this view, prioritize the security of circulation of commercial papers and the protection of the rights of holders. In a decision by the 11th Civil Chamber of the Court of Cassation, when overturning the decision of the first instance and regional appellate courts that “responsibility ceases,” it provided the following reasoning: “that the drawer-payee and endorsers whose signatures appear on the check are jointly and severally liable to the defendant …, who became the holder as a result of the drawer reintroducing the check into circulation by re-endorsing it.” (Court of Cassation 11th Civil Chamber – 2020/6363 E.).
The basic logic of this approach is as follows: Principle of Joint and Several Liability: Everyone whose signature is on the check (drawer, payee, endorsers) is jointly and severally liable to the holder. The holder can claim against any debtor they wish, or all of them together. As stated by the 19th Civil Chamber of the Supreme Court (2015/12521), “Persons within the chain of endorsement are liable to the holder as joint and several debtors, and the holder may claim against each of them… without being bound by their order.”
Endorsement Back Not Removing Liability: The Turkish Commercial Code (TCC) has not prohibited the endorsement of a check to one of the debtors (including the drawer) or that person re-endorsing the check. However, this situation does not automatically remove the liability of previous endorsers.
Independence of Signatures: As long as the endorsement of the payee or endorser is not cancelled, their signature on the instrument remains valid, and this signature constitutes an undertaking towards the last holder.
Conclusion
In light of the presented court decisions, there is no clear and unified jurisprudence regarding whether the liability of previous endorsers is extinguished when a check is endorsed back to the drawer. However, the following conclusions can be drawn. Common Practice Indicates Liability is Extinguished: In particular, the consistent decisions of the 12th Civil Chamber of the Supreme Court are adopted by numerous lower courts, and in practice, this view is observed to be more prevalent. According to this view, with the check returning to the drawer, the old chain of liability is broken, and a new process begins.
Why is Expert Legal Opinion Necessary in Tuzla and Its Vicinity?
A technical and detailed instrument transaction, such as the endorsement of a check back to the drawer, may seem like a simple legal transaction at first glance, but it can pose serious risks when interpreted incompletely or applied incorrectly. Especially for companies operating in areas with high commercial activity such as Tuzla, Pendik, Kartal, Maltepe, Gebze, Çayırova, and Tepeören, these types of endorsement transactions are directly related to high-value checks and promissory notes.
In commercial relations in these regions;
- Due to incorrect endorsement, legal action being taken against individuals who are not liable,
- Lawsuits being filed with claims of unfair collection,
- Misinterpretation of endorsers’ liability,
- Or, situations such as following an unlawful process in re-introducing a check returned to the drawer into circulation can expose both the creditor and the debtor to serious legal proceedings. Therefore, an exchange law attorney operating in Tuzla should have experience knowing the commercial structure of the region, being familiar with the current precedents of the Supreme Court, and being able to foresee error risks in negotiable instrument practices. Similarly, businesses operating in areas such as Kartal, Maltepe, Pendik, Çayırova, Tepeören, and Gebze should seek support from a legal professional who knows local practices in complex transactions such as check endorsements, which significantly reduces risks such as check cancellation, enforcement cancellation, or undue liability that may arise in the future. Consequently, the answer to the question “Does the liability of previous endorsers continue if the check is endorsed back to the drawer?” depends on the details of the incident and the correct legal assessment. Therefore, it is of great importance for businesses, especially in Tuzla and its surroundings, to work with an attorney specializing in negotiable instrument law.
