A negative declaratory action, regulated by Code of Civil Procedure No. 6100 and Code of Enforcement and Bankruptcy No. 2004, is a type of action brought by a debtor. A negative declaratory action is a lawsuit filed by a debtor who is likely to be subject to enforcement proceedings due to a non-existent debt or an invalid legal relationship, or to prove that the debtor currently subject to enforcement proceedings is not actually the debtor. (GENERAL ASSEMBLY OF LAW 2021/866 K.) A negative declaratory action is referred to in Article 72 of the Code of Enforcement and Bankruptcy as follows:
“The debtor may file a negative declaratory action to prove that he/she is not a debtor before or during the enforcement proceedings.
The court hearing the negative declaratory action filed before the enforcement proceedings may, upon request, issue an interim injunction to halt the enforcement proceedings in exchange for a security deposit of not less than fifteen percent of the receivable.
In a negative declaratory action filed after enforcement proceedings, a stay of enforcement proceedings cannot be ordered through interim injunctions. However, the debtor may request the court to withhold the money held in the enforcement treasury from the creditor through interim injunctions, in exchange for covering the damages arising from the delay and providing collateral of no less than fifteen percent of the receivable.
As can be understood from the wording of the relevant article, a negative declaratory action can be filed by the debtor before or during enforcement proceedings. Even a debtor who has initiated enforcement proceedings and has not objected to the payment order can file a negative declaratory action and claim that they have no outstanding debt. If the negative declaratory action is not concluded before the enforcement proceedings are finalized and the money is paid to the creditor while the negative declaratory action is pending, the case in question will continue as a recovery action. The recovery action will be discussed as the subject of another article.
If the burden of proof needs to be assessed in negative declaratory actions, this burden generally falls on the creditor. However, the following Supreme Court decision on the matter should be taken into consideration:
In a negative declaratory action, the burden of proof generally falls on the defendant creditor; however, there are also cases where it falls on the plaintiff (debtor). If the plaintiff merely denies the legal relationship (e.g., debt) that the defendant alleges exists, in other words, if they claim that this legal relationship (debt) never arose, the burden of proof falls on the defendant. This is because the party alleging the existence of the legal relationship (debt) is the defendant. However, the burden of proving that the promissory note relied upon by the creditor is unpaid falls on the plaintiff. Similarly, if the plaintiff alleges that the defendant’s claimed receivable terminated for a reason such as payment, discharge, or set-off, the burden of proving this claim falls on the plaintiff. (COURT OF APPEALS GENERAL ASSEMBLY OF LAWS 2017/934 E., 2021/114 K.)
Jurisdiction and Statute of Limitations in Negative Declaration Cases
In negative declaratory proceedings, jurisdiction lies with the defendant’s domicile, or, if a negative declaratory proceedings were initiated after the commencement of the proceedings, with the court of the enforcement office where the proceedings were conducted. While the statute of limitations may vary depending on the nature of the debt in question, the general statute of limitations is 10 years.
