Aline Cavalcante de Souza Sanches
Lawyer at Marcos Martins Advogados
Reporting to Justice Nancy Andrighi, the Superior Court of Justice ruled on Special Appeal No. 1818926/DF (2019/0154861-7), analyzing the following controversy: is it permissible to judicially dispose of the entirety of an indivisible property, even if the debtor only owns a fraction of the property?
The ruling was that yes, it is permissible to sell a property in its entirety, even if the debtor only owns a portion of it, as long as the co-owner who is not a party to the proceedings is guaranteed preference in the auction of the property and total preservation of their assets, which will be compensated in cash.
The decision, which was overturned by the Superior Court of Justice, had rejected the creditor’s request to auction off the entire property, in which the defendant held only 50% (fifty percent).
The previously established thesis was that the share of the co-owner who is not the debtor should be preserved, given the indivisibility of the property, and that only the share actually owned by the foreclosed party could be expropriated.
In other words, only half of the property owned by the debtor would be put up for sale.
However, the Justice dismissed this position, stating that, under the terms of article 843 of the Code of Civil Procedure, the full sale of an indivisible property is permitted, whenever there is co-ownership, with the owner who is not party to the execution being entitled to the equivalent in cash of their share.
This legal provision states: “In the case of seizure of an indivisible property, the equivalent of the share of the co-owner or spouse who is not party to the execution shall fall on the proceeds of the sale of the property.”
Thus, the third party who is neither the debtor nor responsible for paying the debt is guaranteed to receive the amount of money corresponding to their share of the property, which cannot be less than the appraised value, proportional to their share.
In addition, the co-owner, other than the debtor, will have the right of first refusal to purchase the property, in accordance with Article 843, paragraph 1, of the Code of Civil Procedure.
The ruling also established that these rights of the co-owner are guaranteed regardless of any manifestation, stating that “the opposition of third-party embargoes by the spouse or co-owner unrelated to the execution has become dispensable, insofar as the law grants them automatic protection, both for the preference in the auction of the property, and for the full preservation of their assets, if converted into cash.”
Despite these guarantees, the opinion expressed in the judgment is that the existence of co-ownership does not prevent the full sale of the property, which can be submitted to a judicial auction, regardless of the wishes of the other owner.
Therefore, the existence of co-ownership does not rule out the possibility of full judicial sale of the indivisible property, due to the debts of only one of the joint owners, with the others receiving the appraised value of their share.
Marcos Martins Advogados is available to propose legal solutions for enforcement proceedings, applying the most recent rulings of the Higher Courts.
