In a decision rendered in November of 2017, the Superior Court of Justice (STJ) understood that it is possible to exclude a fine levied by the court in the event of impossibility of performance by the obligor, in line with the innovations introduced by the Brazilian Code of Civil Procedure (CPC) of 2015.
The case (Special Appeal No. 1691748 - PR (2017/0201940-6), Third Panel) reached the Court based on a debate regarding review of just cause for nonperformance for more than six years of the obligation to immediately transfer and make available to a client shares acquired through the appellant bank. The nonperformance, according to the bank, was due to an impossibility to fulfill the obligation, and for this reason the fine levied by the court - in an amount of which exceeded $2 million – was argued to not be due.
The opinion drafted by Justice Villas Bôas Cueva clarified that the imposition of a fine is intended to compel performance of obligations in a specific manner and, in line with the provisions of article 537 of the Code of Civil Procedure, the value of the fine may be revised in cases where it has become either insufficient or excessive; or if the obligator proves just cause for nonperformance.
Justice Cueva also stressed the STJ's view that, in light of the factual and substantive impossibility of complying with the court order handed down, the fine imposed must be overturned, since it is intended to prevent noncompliance of a mandatory injunction.
According to the decision, due to the non-preclusive nature of the decisions that levy fines, the judgment should be modified, and the trial judge should assess the allegations made by the bank regarding just cause for nonperformance of the obligation.
Also, in the same decision, regarding the feasibility of offering a performance bond by the bank for the purposes of levy of execution, the appeal was also granted relief, thereby modifying the decision so as to authorize the offer of a performance bond by the judgment debtor in substitution of money.
In justifying this understanding, Justice Villas Bôas Cueva pointed out that in spite of the fact that the case law of the Court had been established under the aegis of the Code of Civil Procedure of 1973 and, therefore, was to the effect that the levy of execution upon money has legal priority over bank issued guarantee and performance bond, the subject deserves further reflection in light of the 2015 Code of Civil Procedure. According to article 835, paragraph 2, of the Code of Civil Procedure, for purposes of substitution of the asset upon which execution is levied, a bank issued guarantee and a performance bond are equivalent to money, provided they are not of a lower value than the debt stated in the complaint, with thirty percent added.
The Justice who drafted the opinion also stressed that the change in legislation allows for harmonization of the principles of maximum effectiveness of execution for the judgment creditor and less burdensomeness for the judgment debtor, thereby giving proportionality to the means for settlement of judgment debts. Thus, there would be no reason to reject a guarantee, except for insufficiency, formal defect, or inadequacy of the assurance offered.