"Frauds to the creditors and as to their execution".

Creditors Fraud

Already in the Roman Law was the concept of fraud against creditors.

Originally the debtor responded with his own body for his obligations, and that failure to comply with them put him in a situation analogous to that of slaves.

Over time there was an evolution of law and civilization until the emergence, in Rome, of Lex Poetelia Papiria. From this moment, the debtor stopped responding physically, passing on his equity to guarantee the debts.

As a natural consequence, the possibility arose of the debtor becoming insolvent in a fraudulent way, by the donation or alienation of their assets that would serve, by right, to guarantee their creditors.

The response to this concrete possibility came, always in Rome, thanks to the Pretor Paul, who created the so-called "Paulian Action", initially as a criminal action, precisely with the intention of punishing both the main fraudster (debtor) and the Had engaged in fraudulent maneuvers.

Later, the Paulista Action also invalidated the legal transactions subject to fraud to creditors.

Regarding the history of the Praetor "Paulus", who created the "Paulian Action", there is a certain mystery. According to some, it could be Fr. Rutilio Calvo (where P. could be Paul, or Publius) mentioned by Livy among the Roman praetors of 169 BC. In this case there could be a coincidence of author between the "Actio Pauliana" and The "Actio Rutiliana", which also deals with related issues, that is, guarantees of creditors in case of bankruptcy. According to others it would be the "giureconsulto" (jurist) Paulus, praetorian prefect of Rome in 222 a.C., according to others still the name would be fruit of an evolutionary process occurred during the Byzantine period.

In today's Brazilian legislation, fraud against creditors is an illicit means of preventing creditors of an insolvent debtor from taking the assets of the debtor as payment of debts.

It is fraud against creditors to practice, by the insolvent debtor, or in the imminence of becoming such, of malicious acts that distract or embezzle his patrimony, with the scope of putting him safe from an execution for debts reducing the guarantee that such patrimony Represents for the credit rights of third parties.

This subject is embedded in the social vices of the legal business, along with the simulation.

It is an illicit and nullifying device, provided for in articles 158 to 165 of the Civil Code.

The requirements for the characterization of fraud against creditors (article 158 CC) are three:

1) the previous credit

The creditors after the insolvency of the debtor can not claim the annulment of legal transactions carried out by the debtor, if at the time of the realization of such business they were not of him creditors. It is the obligation of creditors to make sure of the debtor's equity situation before concluding business.

2) consilium fraudis, that is to say, the faith and intent to defraud

The creditor is required to prove that the debtor was aware that his conduct would cause losses and that the third party acquirer also had prior knowledge that the act of alienation carried out on his behalf would result in losses to the collateral of the alienating creditor. For the annulment of the legal transaction, it is necessary to prove the bad faith and the collusion of the debtor with the acquirer to squander the equity, otherwise, the rights of the acquirer in good faith are preserved.

3) the eventus damni, that is to say the actual damage caused by the creation of the insolvency situation

In order to prove the actual damage, that is to say, insolvency, the creditor may invoke the presumption of insolvency foreseen in art. 750 CPC, it being incumbent upon the debtor in the face of such claim, indicate the possible existence of other assets sufficient to guarantee the debt. The causal link between the disputed disposal and the insolvency of the creditor must also be established.

The cases in which the Civil Code establishes presumption of fraud to the creditors are the following:

Transfer or free transfer or remission of debt (article 158 CC). In this case it is irrelevant to the science of the donor's insolvency of the donor. The interest of the creditor prevails over the interest of the grantee, since the intention is to avoid damages. The same is true for the remission of debts, since in pardoning some debt the assets of the creditors are reduced.

Assignment or sale for consideration, if committed by an insolvent debtor (article 159 CC). In this case there is a conflict between the creditor and the acquirer in good faith. If the acquirer has not and could not be aware of the insolvency of the debtor, his interest is that it will prevail over that of the creditor. Otherwise, if he acted in bad faith, he becomes an accomplice of the debtor and the business can be revoked.

Prepayment of debts due (article 162). If the debtor, on expiration, pays off the overdue debts acts lawfully. However, if you pay future debts, you act abnormally, which reveals the fraudulent purpose.

Fraudulent granting of real guarantees or constitution of preemptive rights to some of the creditors (article 163 CC).O Payment shall be made in proportion to all creditors and no preference may be given to any of them. There is also the possibility of Fraud not finalized, in which, if the value of the disposal of a good is fair and has not yet been paid, the buyer (Art. 160 CC). In all cases where fraud is created for creditors, that is to say where the dilapidation of the debtor's assets has been architecturally demarcated. That they do not have sufficient assets to meet their obligations to creditors, there is a possibility for the latter to propose the aforementioned "revocatory action" or "Paulian action". This is because the debtor's equity is the guarantee of the satisfaction of the debtors. The purpose of the Pauline Action is to render the act or business ineffective by causing the wrongly alienated property to return to the debtor's assets. Of being characterized as conservative of rights, is also characterized as a preliminary act of execution. It is worth mentioning that art. 164 CC has consistently added that the business necessary for the subsistence of the debtor or his family is to be regarded as valid and not fraudulent. This provision has obvious meaning, otherwise, the debtor would be bound by insolvency or bankruptcy. The fact that it can continue to produce is a means of subsistence not only for itself but also a guarantee for creditors. Thus, for example, a trader who is insolvent may continue to sell the products he markets without setting up a fraud against creditors. He will not be able to sell the establishment, but he will be able to do everything necessary to maintain his trade, and his family. Fraud to creditors, by itself, does not constitute a criminal offense, its scope being limited to the civil sphere. Different from the case of execution fraud (Article 179 of the Code of Civil Procedure), which will be dealt with in the following paragraphs. Execution fraud Execution fraud consists in the subtraction of assets from the seizure, using pipelines such as alienation, diversion, destruction or damage. It can also be set up in acts aimed at harming the apportionment among creditors, by including fictitious debtors to simulate debts. This fraudulent alienation modality, unlike the fraud against creditors, materializes in the condemnation or execution process. It is more serious than fraud against creditors, and it frustrates the jurisdictional function in progress, subtracting the object on which the execution falls. In practice, in order to be configured, there must be an ongoing action where the debtor has already Has been summoned, and that there is a pledge, execution or sentence apt for execution. Because of its gravity, fraud to execution is repelled with more force by the legal system. The fraudulent act, contrary to the fraud against creditors, does not annul the acts of alienation, only declares them ineffective in relation to the Lender impaired. It follows that the act remains valid and effective before third parties, and can not be opposed to the impaired creditor. Another effect of executing fraud is that the act of the debtor is considered as an offense against the dignity of justice (article 600 CPC) , Subjecting it to the feathers of art. 601 of the CPC, which provides for the possibility of applying a fine to the debtor in an amount not exceeding 20% of the updated value of the debt. The basic differences between execution fraud and fraud against creditors is that fraud against creditors presupposes a debtor in State of insolvency, occurs before the creditors have entered in court to collect their credits, needs the existence of consilium fraudis and has as a result the annulment of the act practiced by the debtor; Since fraud to execution does not necessarily depend on the debtor's insolvency, it only occurs in the course of legal action against the alienant, it is presumed by the simple alienation of the patrimony and has as effect the inefficacy of the act practiced. According to the CPC (Article 593), fraud to execution occurs when the alienation or encumbrance: a) falls on assets on which an action based on real right depends; B) occurs when it ran against the debtor demand able to reduce it to insolvency; And c) focuses on other hypotheses provided by law. There are exceptions, provided by law, that limit the possibility of the creditor to obtain some property of the debtor. 648 of the CPC defines which assets are immune to execution, because they are considered unenforceable or inalienable. 649 CPC fixed absolute impenhorabilidad of certain goods and, the successive art. 650 presents another list of goods exempt from attachment in certain situations. There is also legal provision for fraud to execution typified in art. 185 of the CTN (National Tax Code), which states that "The alienation or encumbrance of property or income, or its beginning, is presumed fraudulent.