Fiduciary alienation is a commonly utilized form of guarantee in financing and acquisition agreements, particularly in real estate and vehicle transactions.
In this arrangement, the ownership of the asset is temporarily given to the trustee (such as a bank or financial institution) until the borrower fully repays the debt, while the borrower retains physical possession of the asset.
Can property that is physically located elsewhere be used as collateral in legal proceedings?
The response relies on a thorough examination of laws and legal decisions, taking into account the specifics of the trust transfer agreement and the privileges of the trust creditor.
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What does fiduciary alienation mean?
Fiduciary alienation is an agreement where the borrower pledges resoluble property of an asset to the creditor as security for a debt.
The creditor is the legal owner of the asset, but the debtor retains physical possession and usage rights.
This financing model is popular as it provides increased safety for the lender, who is able to recover the asset in case of default.
After the debt is forgiven, ownership of the property reverts back to the debtor.
Legal basis: Fiduciary alienation is regulated by Law No. 9,514/1997 (mobile goods) and Decree-Law No. 911/1969 (mobile goods).
Can a pawn be used for fiduciary alienation of goods?
Fiduciarily alienated assets in Brazil cannot be used as collateral to settle debts owed by the fiduciary debtor.
The trustee retains ownership of the property until the debt is fully repaid.
Important exceptions exist.
- Purchasing rights can be pawned even if the actual good itself cannot be used as collateral.
The creditor involved in the execution process is entitled to request the amount that has been already paid by the fiduciary debtor.
Art. 835, XII of the CPC allows for the postponement of rights resulting from contracts.
The pawn must follow the following order as stated in Article 835 of the CPC.
Acquiring rights from a promise to purchase and sell and fiduciary transfer as collateral.
- In cases where the value of the goods is higher than the debt amount, the surplus can be used as collateral as long as it upholds the rights of the creditor.
- If the fiduciary property is not tied to a specific debt guarantee, it could be pledged under special circumstances unrelated to the guarantee.
How does the rental address system function?
Practical advice for lawyers on fiduciary relationships
Analyze the contract for fiduciary alienation.
Before suggesting or questioning the pawning of the item, review the conditions outlined in the trust alienation agreement.
- Who is the person in charge.
- The remaining debt amount and the proportion already paid by the borrower under the trust.
- The potential transfer of buying privileges.
Practical advice: Make sure to obtain verified copies of the contract at the office or financial institution to check for clauses that may impact the item’s pawnability.
Feather Acquisitive Rights Request
If the item cannot be used as collateral, inquire about the withdrawal privileges of the debtor in trust, specifying the amount equivalent to the payments made.
Ask the bank to provide the current debt balance and available credit limit.
Attend the boundaries of non-seizability.
Ensure that the item is not safeguarded by impenetrability regulations, such as real estate utilized as a family residence under Law 8.009/90.
Feather of ownership and trustee transfer: Real-world connections
While the transferred property is typically not used as collateral, utilizing purchasing rights as an option in legal proceedings can be effective.
The pawning of additional assets belonging to the fiduciary debtor, not associated with the fiduciary guarantee, can also be used as a supplementary method to recover debts.
In a debt collection process, a financed vehicle may not be used as collateral directly. Instead, the portion of the vehicle already paid by the borrower can be pledged as collateral by transferring the purchasing rights.
Jurisprudence regarding pledging of assets and trust transfers
Application explanation – adherence to the principles of collaboration and legality
1. The decision to consider only a portion of the application for judgment is based on the purchasing rights rather than personal hypotheses. It does not involve delaying judgment, but rather focuses on specific aspects. 2. The satisfaction of the credit indicated by the executive title is dependent on the creditor identifying the debtor’s assets that can be sold to settle the debt. The magistrate’s decision to restrict the execution to purchasing rights aligns with legal boundaries and cooperation principles.
Judgment 1374920, 07133917720218070000, was delivered by Rapporteur LUÍS GUSTAVO B. DE OLIVEIRA, Fourth Class, on 23/9/2021, and published in the DJE on 8/10/2021.
Purchasing rights feather – adherence to the legal order of preference
Article 805 of the Civil Procedure Code requires delays to be carried out in the most cost-effective manner for the debtor, without disregarding the creditor’s interest in debt satisfaction as outlined in Article 797. The replacement of penalties is subject to creditor agreement, with consideration of whether it serves the interest of debt satisfaction and complies with legal requirements set forth in Articles 835, 847, and 848 of the Code. Substituting court-pawned property with vehicles under fiduciary alienation is not in line with legal procedures, causing harm to the creditor and failing to adhere to Article 835.
Judgment number 1141935, with Rapporteur ESDRAS NEVES from the Sixth Class, was issued on 6/12/2018 and published in the DJE on 11/12/2018.
Option to use rights on a well-located property within an unauthorized condominium for collateral
Within the framework of the e. TJDFT, it is now understood that delays and divestitures in public auctions of possession rights related to irregular properties are allowed due to their economic value, particularly in the context of the Federal District. It is also noted that property rights in irregular condominiums can be used as collateral since the restriction applies to personal rights rather than the property itself. Additionally, it is emphasized that the sale in public auctions does not change ownership of the land, which remains with the current holder. It is important for claimants to be aware of the property’s status and the risk of losing it if the Public Power invalidates the rights granted. Finally, the economic value of possession rights over irregular properties allows for the repetition of public auctions to repay condominium debts.
Judgment 1313096, 07132092820208070000, Rapporteur: JOHN EGMONT, Second Class, Date of Judgment: 27/01/2021, published in the DJE on 09/02/2021.
An efficient substitute for fiduciary alienation is establishing procurement entitlements.
The pawning of items in fiduciary alienation agreements showcases significant subtleties that illustrate the unique aspects of this form of security.
The fiduciary good cannot be used as collateral directly, but there are legal options available, like using the purchasing rights of the fiduciary debtor, which can be a successful approach to repay the debt.
Goods not associated with the fiduciary guarantee or surpassing the debt amount may be a viable option, as long as the rights of the fiduciary creditor are respected.
Lawyers handling fiduciary alienation cases need to thoroughly examine the relevant contracts and laws, and utilize procedural tools effectively to recover credits in a legal and efficient way.
Read our publication on Prescription and Decay: Definitions and disparities.
