São Paulo Court of Justice protects guarantors of company in debt recovery proceedings.

Creditors may be prevented from using guarantors to collect debts from companies undergoing bankruptcy proceedings. The Court of Justice of São Paulo (TJ-SP) issued, for the first time, a decision to that effect. The judgment took place in the 22nd Chamber of Private Law and was a close vote: three to two.

The majority of the judges' decision is based on a detail in the process: a clause in the company's recovery plan providing for the suspension of guarantees while payments are being made. This plan was approved at a general meeting of creditors.

When a company enters into receivership proceedings, it is entitled to a grace period. Collection actions are suspended for 180 days—a period that can be renewed. However, Brazilian courts understand that this benefit does not extend to third parties, the guarantors of the debt, who are often the company's own partners.

There is even a ruling from the Superior Court of Justice (STJ) on this subject. It is ruling number 581. It states that "the judicial reorganization of the principal debtor does not prevent the continuation of actions and executions filed against third-party joint debtors or co-obligors in general, by way of negotiable instrument, real or surety guarantee."

For this reason, then, guarantors become the main target of debt collection. Creditors have no impediment regarding them and even manage to escape the constraints of the recovery plan — which usually provides for a grace period, discounts, and debt installment plans.

This is precisely the background to the case judged by the 22nd Chamber of Private Law of the TJ-SP (Court of Justice of São Paulo). Guarantors of one of the alcohol and derivative plants of the Farias Group, which is undergoing judicial reorganization, were being sued, through an enforcement action, by one of the company's creditors (case no. 1053517-30.2019.8.26.0100).

The rapporteur for this case, Judge Roberto Mac Cracken, mentions, in his opinion, article 49, paragraph 1, of the Bankruptcy and Reorganization Law (No. 11,101 of 2005). This was the provision that served as the basis for the formation of jurisprudence in the Superior Court of Justice (STJ). It states that the creditors of companies retain their rights and privileges against third parties (guarantors and sureties, for example).

Mac Cracken, however, points out that there is a supplement in paragraph 2 of the same article 49. The text states that "the originally agreed conditions" must be preserved, but with a caveat: "unless otherwise established in the judicial reorganization plan".

He emphasizes that, in the case under analysis, the plan expressly stipulated that actions and executions against the companies in recovery, their partners, affiliates, and guarantors—endorsers or sureties—would be suspended. Creditors would have to receive payment according to the conditions stipulated in the plan.

"The approval of the judicial reorganization plan also effected novation with respect to the guarantors," says the rapporteur, dismissing the application of Precedent 581 of the Superior Court of Justice (STJ). This understanding was supported by two other judges, forming a majority to suspend the collection from the company's guarantors.

This issue is controversial because there is an understanding within the court that clauses like the one included in the Farias Group's plan—affecting third parties—are illegal. There are rulings to that effect in the Business Law Chambers that judge bankruptcy proceedings in the São Paulo State Court of Appeals.

Judge Alberto Gosson, who dissented from the rapporteur's vote, uses this argument in his opinion. "The clause addresses the interests of individuals who were not involved in the decision and who undoubtedly would not have agreed to the elimination of a legitimately established right," he says.

The statement takes into account the fact that the creditor, when collecting the debt from the guarantor, has no interest in the company's recovery process and does not participate in the discussions or the general meeting for the approval of the plan.

According to lawyers working in the field, the decision by the 22nd Chamber of Private Law is connected to a new legal argument that has emerged in the Superior Court of Justice (STJ). The justices of the 3rd Panel have been ruling that a judicial reorganization plan can stipulate the elimination of guarantees if creditors approve it.

Furthermore, they assert that all creditors are bound by the majority decision—those who voted in favor of the plan as well as those who opposed it or did not attend the general meeting. The first decision by the Superior Court of Justice (STJ) in this regard was issued in 2019 (REsp 1700487). There are at least two others, in REsp 1838568, judged in August of last year, and in REsp 1582148, from March of this year.

“It’s not that there has been a change of understanding in the Superior Court of Justice (STJ). Summary 581 remains valid. The creditor can collect from the guarantor in the initial phase, between the start of the recovery process and the approval of the plan. If the plan contains a clause extinguishing or suspending the guarantee, and the class to which the creditor belongs has approved this clause, the creditor will be bound by it and cannot continue with the execution,” says Ricardo Siqueira, partner at the RSSA law firm.

The lawyer points out, however, that this does not mean that creditors can never again pursue the guarantors. In the event of bankruptcy, for example, he states, the guarantees would be reinstated. “It’s in the law. This, in fact, reinforces the understanding that there can be a suspension of enforcement against the guarantor during the judicial reorganization process. If it were different, there would be no reason for this legal provision to exist.”

Source: Economic Value