The Ineffectiveness of Asset Transfers in Fraudulent Conveyance: Procedural Aspects and Current Case Law

This article analyzes the ineffectiveness of asset transfers carried out in fraud of execution, pursuant to Article 792 of the Brazilian Code of Civil Procedure (CPC) of 2015. Through a systematic approach, it aims to clarify the legal requirements for recognizing fraudulent conveyance, the legal effects of such ineffective transfers, and the procedural mechanisms available to protect the creditor. Supported by specialized legal doctrine and updated case law, the article highlights the well-established understanding that the ineffectiveness of the act does not require an autonomous annulment action, but rather may be recognized incidentally within the enforcement proceedings.

The transfer of assets with the intent to frustrate the satisfaction of judicial credit is a practice frequently encountered in enforcement proceedings. When such conduct is identified during the course of an action, it constitutes what is known as fraudulent conveyance, a doctrine well-established in Brazilian law as a means of preserving the effectiveness of judicial enforcement.

In this context, a transfer carried out in fraud of execution is deemed ineffective in relation to the creditor, under the terms of Article 792 of the CPC. Unlike absolute nullity or fraud against creditors under substantive law, fraudulent conveyance in enforcement has its own features and specific legal effects, which must be understood by lawyers, judges, and parties engaged in execution proceedings.

2. Legal Basis and Legal Concept

Fraudulent conveyance is provided for in Article 792 of the Code of Civil Procedure, which states:

"Art. 792. The transfer or encumbrance of property shall be deemed fraudulent when:"

I – an action based on a real right or with a revendicatory claim is pending over the property, provided such action is recorded in the relevant public registry;

II – a notation of the enforcement proceeding is recorded in the property registry;

III – at the time of transfer or encumbrance, an action was pending that could render the debtor insolvent;

IV – in other cases expressly provided by law.

The legal nature of fraudulent conveyance in execution differs from nullity. It is considered a case of relative ineffectiveness, producing effects only between the transferor and the enforcement creditor.

3. Requirements for Recognizing Ineffectiveness

To deem a transfer ineffective in relation to the enforcement creditor, it is necessary to demonstrate:

The existence of a pending enforcement proceeding;

The transfer of property valuable for debt satisfaction;

The acquirer's knowledge of the enforcement proceeding (when there is no formal notation of the action);

The potential insolvency of the debtor as a result of the transfer.

The Brazilian Superior Court of Justice (STJ) has reaffirmed that an annulment action is not required to declare the fraud:

“The ineffectiveness of a transfer in fraud of execution may be recognized within the enforcement proceedings themselves, and a separate annulment action is not necessary.” (STJ, REsp 1.141.990/SP, Reporting Justice Luis Felipe Salomão, DJe 10/15/2019)

4. Legal Effects of Ineffectiveness

The direct consequence of fraudulent conveyance is the ineffectiveness of the legal act vis-à-vis the creditor, meaning that the transferred asset may still be subject to attachment, even if it is formally in the name of a third party. However, this ineffectiveness:

Does not invalidate the transaction between the original parties (transferor and transferee);

Does not prevent the good-faith third party from defending their interest through third-party objections (Article 674 of the CPC);

Does prevent the third party from opposing judicial enforcement.

5. Protection of the Good-Faith Third Party and STJ’s Binding Precedent No. 375

The good faith of the acquirer is a key element in discussions about the validity of the transfer. According to STJ’s Binding Precedent (Súmula) No. 375:

“The recognition of fraudulent conveyance requires either the registration of the attachment of the transferred asset or proof of the acquirer’s bad faith.”

This precedent reinforces the importance of registering the attachment of real estate or vehicles; absent such registration, proof must be provided that the third party was aware of the pending legal action.

Thus, the characterization of fraudulent conveyance requires either objective or subjective proof of bad faith—presumed in some contexts and excluded in others, depending on the facts of the case.

6. Procedural Aspects: Procedure and Defense of the Third Party

The finding of fraud may occur:

Ex officio by the enforcement judge;

Upon request by the creditor, with supporting grounds.

The third-party acquirer may:

File third-party objections (CPC, Article 674);

Request the removal of the asset from the attachment, upon proving good faith and absence of fraud.

In addition, the CPC/2015 provides that recording the enforcement action on the property's registry (Article 828) is an effective method to prevent claims of unawareness by the acquirer.

7. Final Considerations

Fraudulent conveyance is a central doctrine in enforcement proceedings, with the ineffectiveness of the asset transfer being its main legal consequence. The current CPC framework, together with STJ jurisprudence, seeks to balance credit protection with the good faith of third-party acquirers, establishing objective criteria for identifying fraudulent conduct.

Mastery of this topic is essential for attorneys involved in asset protection or credit enforcement, particularly in an era of increasing complexity in business transactions and frequent attempts at irregular asset shielding.