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“Frustration of the execution” is the title of the Chapter VII, of the Title XIII, about the crimes against the patrimony and the socioeconomic order, of the Book II of the Spanish Penal Code (CP).
With this title, maybe you do not know about what we are talking, but I am sure that if I said “fraudulent transfer”, all of you would nod with your heads as an indication that you know, more or less, the matter treated. This change of nomenclature was another of the consequences which brought the reform of the Spanish Penal Code, through the Organic Law 1/2015, by which the behaviors of obstruction and frustration of the execution, before known as fraudulent transfer, started to be distinguished from the crimes of insolvency and bankruptcy. The point XVI of the Exposition of Motives of the Organic Law 1/2015 says: “It is carried out a technical review of the crimes of punishable insolvency which departs from the necessity of establishing a clear separation between the behaviors of obstruction and frustration of the execution, to which traditionally have been referred the crimes of fraudulent transfer, and the crimes of insolvency and bankruptcy. These groups of crimes are now regulated in different chapters.
Within the crimes of frustration of the execution are included, along the fraudulent transfer, two new criminal figures which are called to complete the penal protection to the procedures of execution and, with it, of the credit, and which are usual in the compared Law: on one hand, is typified the concealment of goods in a judicial or administrative procedure of execution; and on the other, the not authorized use by the depositary of goods seized by the authority.”
Therefore, with the reform of the CP trough the Organic Law 1/2015, is distinguished between the behaviors of frustration of the execution, before known as fraudulent transfer, and the crimes of insolvency or bankruptcy. Being focused this writing in the former.
The Chapter VII, which we are commenting, is formed by four articles: An article 257, where we find described the classic crime of fraudulent transfer; An article 258, where what is punished is the deception in a judicial or administrative procedure for sharing an uncomplete list of goods, or simply for not sharing any list; An article 258 bis, which punishes those who make use of seized goods by the public authority, and; An article 258 ter, by means of which are established the punishments that should be imposed to legal entity, when they are responsible of any of the above crimes.
Let us now see the exact content of this articles and what has been said by the Spanish Jurisprudence about them.
– Article 257:
The article 257 says:
“Article 257.
1. Will be punished with the punishments of imprisonment from one to four years and fine from twelve to twenty-four months:
1º Who fraudulently transfer goods in prejudice of his creditors.
2º Who with the same end carries out any act of patrimonial disposal or generator of obligations which prolongs, hinders or impedes the efficacy of a seizure or of a judicial, extrajudicial or administrative executive or enforcement procedure, initiated or of foreseeable initiation.
2. With the same punishment will be punished who carries out acts of disposition, assumes obligations which diminish his patrimony or conceals by any means elements of his patrimony upon which the execution would be effective, with the goal of eluding the payment of civil liabilities derived from a crime which he has committed or of which he should respond.
3. The stated in this article will be of application whatever the nature or origin of the obligation or debt whose satisfaction or payment is attempted to elude, including the economic rights of the workers, and regardless whether the creditor is private person or any legal entity, private or public.
Notwithstanding the above, in the case that the debt or obligation which is tried to be eluded is of public Law and the creditor is public legal entity, or they are pecuniary obligations derived from the commission of a crime against the Public Treasury or the Social Security, the punishment to be imposed will be of imprisonment from one to six years and fine from twelve to twenty-four months.
4. The punishments stated in this article will be imposed in their superior half in the cases of the numeral fifth and sixth of the point one of the article 250.
5. This crime will be pursued even when after its commission is initiated a bankruptcy proceeding.”
After reading the article 257, we can divide this in three parts: A first one, where we can include its first two points, in which are described the typical behaviors; A second one, with its third and fourth point, where are gathered special cases in which the punishment is incremented, and: A third one, where expressly is applied the stated by the article 257, to the cases in which after having been committed the crime is initiated a bankruptcy proceeding.
As is logical, let us start with the first. In the first point of the article 257, after mentioning the punishments with which will be punished, are described two behaviors: One of fraudulently transferring goods in prejudice of the creditors, and: Other, which supposes any act of patrimonial disposal or generator of obligations which prolongs, hinders or impedes the efficacy of a seizure or of an executive or enforcement procedure initiated or of foreseeable initiation.
As we are able to see there are great differences between both behaviors, but also great similarities. Let us start with the former. If in the former, it is protected the legal good of security of the legal traffic by means of the strengthening of the principle of universal liability for the fulfillment of the liabilities of the article 1911 of the Civil Code (CC), in the last, it is protected the institutionalized mechanisms with which the legal order protects the credit. Besides, there exists another important difference, while in the former behavior is demanded the effective concealment of the goods to the creditors, in the last it is enough with carrying out any legal business which hinders the execution of the credits owed to the them, though should be also gravelly affected a current process of credit execution or one of imminent execution. The Spanish Supreme Court´s sentence number 2594/2023 says: “It is true that the legal good protected by the crime of fraudulent transfer is not as much the right of credit born from the concrete legal or contractual relation as the security in the legal traffic through the strengthening of the principle of universal liability for the fulfillment of the obligations enshrined in the article 1911 CC (Spanish Civil Code). Thus, that the nature of the crime is of mere activity and that the injury, or not, of the concrete credit is left out of the typical description.
But the second ordinal introduces, against the historic regulation of the crime of fraudulent transfer, a modality of action, broadly claimed by the specialized doctrine, that extends the space of prohibition to the carrying out of all legal business which prolongs, hinders or impedes the efficacy of a current procedure or of imminent activation of seizure, executive or enforcement procedure, whether judicial or extrajudicial -Spanish Supreme Court´s sentence number 51/2017 of 3 February-. And whose definitive shape has come by the hand of the reform carried out by the Organic Law 1/2015 which denominates the chapter under the title of “Frustration of the Execution” and introduces special types of punishable insolvency.
The subtype protects the mechanisms tending to the execution of the debts without prejudice of the prevalence of these or the guarantees which them can enjoy. The injury of the legal good is not produced because through such bargaining acts is necessary provoked a situation of insolvency but because is significantly affected the efficacy of the institutionalized mechanisms with which the legal order protects the credit. Particularly, the tending to guarantee and execute, in its case, the goods with which has to be responded.”
This understood, we clarified, effectively that: “It is true that such modality of fraudulent behavior is not a kind of general prohibition of disposing or an order of patrimonial immobilization while lasting or is initiated the procedure of execution for the preexisting debts”, though qualified, an extreme which has here a particular importance, “But always that the business that are carried out generate the entry of the new assests of economic content – equivalent patrimony which do not provoke the forbidden “executive frustration” – Sentence 552/2016 of 22 June-.
The subtype of the article 257.1.2º CP protects not only the generic mandate of universal liability of the article 1911 CC which benefits all of the creditors but also, we insist, the immediate efficacy of the public tools put at the service of the tidy credit execution, what suggests, with clarity, the plurioffensive character of the action.
It is not important the nature of the credit which is the object of current or imminent execution but rather the conscience of the debtor that the executive procedure has been initiated or will be initiated for sure which entails positive obligations tending to not impede, prolong or hinder its adequate development.
Unlike the modality of the article 257.1.1º CP, the specific penal unlawfulness does not demand the concealment or elusion by fiduciary mechanisms of the goods which may respond to the payment of the demandable debts. It is enough with carrying out a dispositive business which either generates additional patrimonial obligations or reduces the assets, gravely affecting the current or immediate procedure of credit execution -Spanish Supreme Court´s sentence number 93/2017, of 16 February-.”
On the other hand, the similarities, evidently both behaviors share the elements of which are made up. The same Spanish Provincial Court of Palma de Mallorca´s sentence number 1249/2023 mentions them: “The Spanish Supreme Court´s resolution of 6 October 2022, quoting the sentence 711/2022, of 13 July, says that “according to what we pointed out in the sentence number 355/2017, of 17 May “in accordance with the jurisprudence of the Supreme Court (Sentences 1253/2002, of 5 July; 1122/2005, of 3 October; 652/2006, of 15 June; 557/2009, of 8 April; and 4/2012 of 18 January), the elements of the crime of fraudulent transfer are the following:
1) The previous existence of credit against the active subject of the crime, which may be overdue, liquid, and payable credits, but it is also frequent that the defrauder proactively seeks an insolvency situation before the known imminence that the credits will reach their maturity, liquidity, or exigibility.
2) A dynamic element which consists in a real or fictitious destruction or concealment of his assts by the debtor.
3) Resulting in the insolvency or diminishing of the patrimony of the crime which makes impossible or hinders to the creditors the collection of which is due to them.
4) A special intention in the agent of defrauding the legitimate expectations of the creditors of collecting their credits. It is enough for its commission that the active subject makes disappear from his patrimony one or various goods seriously hindering with it the effectivity of the right of the creditors, and he should act with this end.”
As you have been able to observe, among the typical elements mentioned, we find the subjective type, which, as we have already seen, consists in an intention, in the existence of this malice, of feigning an insolvency for avoiding the payment of the creditors.
Pay attention too, to how in the own first point of the article 257 is integrated the malicious character of the crime, by demanding in both cases, that the behavior should be carried out “in prejudice of his creditors.” Our courts have understood that, it is not necessary the existence of a real and effective prejudice in the owner of the right of credit, being enough with carrying out this concealment or subtraction of the goods, for the real prejudice pertains, not to the stage of perfection of the crime, but to its exhaustion. The Spanish Provincial Court of Palma de Mallorca´s sentence number 1249/2023 says: “The sentence 299/2019 continues saying that “The expression “in prejudice of his creditors” used by the article 257 CP, has always been interpreted by the doctrine of this Chamber, not as a demand of a real and effective prejudice in the owner of the right of credit, but in the sense of intention of the debtor who attempts to save some good or all his patrimony in his own benefit or in the benefit of other person, hindering the execution which may use his debtors.
From such expression, understood in this way, are deduced three consequences:
1ª There has to be one or various real and existing rights of credit, though may occur that, when the concealment or subtraction occurs, they are not overdue or liquid yet and, therefore, not demandable yet.
2ª The intention of damaging the creditor or creditors constitutes an subjective element of the type.
3ª In this way it is shaped a criminal type as a crime of tendency in which it is enough the intention of damaging the creditors by the concealment which hinders the enforcement procedure, without being necessary that this possibility should be utterly closed, since it is enough with carrying out a concealment or subtraction of the goods, which is the result demanded by the type, for the real prejudice pertains, not to the stage of perfection of the crime, but to its exhaustion.
The active subject can be only the person who has or acquire the condition of debtor, either directly or subsidiarily (Spanish Supreme Court´s sentence number 818/06 of 26 June), on the other hand, there should exist a right of credit by part of the creditor and some pecuniary obligations by the part of the debtor, usually overdue, liquid, and payable (Spanish Supreme Court´s sentence 1062/98 of 23 September, 425/02 of 11 March, 1203/03 of 19 September, 75/06 of 30 May).”
Besides, that the behavior is carried out “in prejudice of the creditors”, as a whole, has another consequence, this crime cannot be committed when the debtor uses his patrimony to pay only part of his creditors. The Spanish Supreme Court´s sentence number 2957/2023 says: “the crime of frustration of the execution, –fraudulent transfer—requires that the behavior should be carried out “in prejudice of the creditors” and that, therefore, there will not be a crime of fraudulent transfer when the active subject, not being able to attend the totality of his debts, even altering the order of preference among the concurring creditors, uses part of his goods to the satisfaction of other debts, in prejudice not of all his creditors but only one of them.”
As an example of the first behavior we can mention, to physically conceal a good in a way that the creditor cannot know where it is, or through a more elaborated legal business like selling a thing in favor of another person, normally family or friends, or to encumber the property or a simple donation from a father to his child. The Spanish Provincial Court of Palma de Mallorca´s sentence number 1249/2023 says: “Like the Spanish Supreme Court´s sentence number 299/2019 points out, “Such concealment or subtraction stated in the penal type, in which are possible utter different modalities, can be done in an elemental way concealing physically a good in a way that the creditor does not know where it is, or in a more sophisticated way, through some legal business by means of which is sold something in favor of another person, usually family or friends, or encumbering the thing, or taking some element of the assets in a way that is hindered or impeded the possibility of an executive procedure, either when this business is real, or because effectively this supposes a true transmission or encumbering but fraudulent.” In this sense the Spanish Supreme Court´s sentence number 853/2005 of 30 June, points out among the modalities of concealment or subtraction, those produce by “physical concealment of a good for hiding it from the creditor, or through some legal business in which is sold some good in favor of another person, usually family or friends, or by means of encumbering the thing, hindering or impeding the possibility of an executive procedure, either when this business is real, or because effectively this supposes a true transmission or encumbering but fraudulent, like in the donations from fathers to their children, whether fictitious business, which do not diminish in reality the patrimony of the debtor, but which impede the execution of the credit because there appears a third as owner of the domain or of a real right.”
As an example of the second, we can mention the constitution of a mortgage loan, or the transfer of the goods to a legal entity in exchange of its shares, when these do not provide the control of the legal entity. The Spanish Provincial Court of Logroño´s sentence number 270/2023 says: “This is why, has to be stressed the utterly open structure of the criminal action, since the norm typifies the “carrying out” of any act of patrimonial disposal or generator of obligations” art. 257.1.2, thus that the constitution of a mortgage loan, does not reasonable to understand that does not implies by his own a reduction in the patrimony but only an obligation of fulfillment, being able to talk only about diminution, when, produced the non-payment of the mortgage loan, has been executed the good which guaranteed the debt, since it looks evident that, according to the legal economic concept of the patrimony which follows the jurisprudence and the doctrine, to assume a mortgage loan substantially diminishes the value of his patrimony.”
And the Spanish Supreme Court´s sentence number 2901/2023: “These circumstances make difficult the seizure and execution of these shares for a value equivalent of the real property. On leaving the real property the patrimony of the appellant in order to pertain to a legal entity (of which the value of the shares obtained do not allow to control the decisions of this legal entity), it hinders and can even impede the efficacy of the execution of the value of the real property, which would not have difficulties if they continued within the patrimony of D. Mario. All the requisites before analyzed concur in the present case, with the behavior carried out by the appellant set as proven facts, without being necessary a total insolvency, but being a crime of mere activity, it does not demand a result, only a prejudice to the debtors which has been proven in the sentence.”
But careful, if by contributing with a good or various to a legal entity, it is achieved its control for having all its shares, the patrimony of the debtor will not be diminished and therefore, there cannot be a crime of fraudulent transfer. The Spanish Supreme Court´s sentence number 2594/2023 says: “4. In the end, in the case, the only that is declared proven is that, effectively, the accused was a debtor of the legal entity, IAG Enterprise, S.L, for the amount of 100.000 euros, as principal, as it was explicitly recognized by him, and whose payment he assumed in the business agreed with the creditor and judicially approved on 16 June 2014. Notwithstanding, and after this, the accused proceeded to the creation of both legal entities, formed by only one shareholder and which were only administered by him, contributing to each of them with both buildings of his property, in exchange of the totality of the legal entities´ shares. Once the debt was not paid within the term agreed and initiated execution against the debtor, was agreed the seizure of the aforementioned buildings, seizure which, naturally, could not be inscribed in the Register of Property, since those buildings had been transferred to the aforementioned legal entities, to whose name they publicly figured since then. On the other hand, “it is not proven that the accused opposed any kind of obstacle to the judicial execution when he designated property or credits for continuing with the procedure of execution, although he presented motion to oppose execution, which was not granted”.
The behavior described, –transfer of the real property to the legal entities–, does not entail the assumption of obligations or execution of acts of disposal which diminish the patrimony of the debtor with efficacy to prolong, hinder or imped the efficacy of the corresponding seizures upon his own goods (particularly, the legal entities´ shares), without being fulfilled the typical demands which form the crime for which he was convicted. Your appeal must be granted.”
Let us now talk about the second point of the article 257. In its case, the objective type is constituted by the behavior of carrying out acts of disposal, assuming obligations which diminishes the patrimony, or concealing by any means elements of the patrimony, with the end of avoiding the payment of the civil liabilities derived from a crime which was committed or of which should be responded.
In this second point, it seems that we find a mixture of the stated in the typical behaviors of the first point, and which, besides, is punished with the same punishment. There will be an illicit behavior, either for the concealment of the goods, or the execution of any act of patrimonial disposal or generator of obligations, for eluding the payment of the civil liabilities derived from a crime. Therefore, we can apply what we saw before to this point too, including, the fact of being a malicious crime, in which the intention of the active subject is to carry out an act in prejudice of his creditors.
Let us now study, the third and fourth point of the article 257, where we said that the punishments stated in its first point were incremented in the case of two different cases.
In the third point are made equal the origin and nature of all the debts, in a way that there will be a crime of fraudulent transfer in any of the cases. The creditors are made equal too, regardless whether they are private persons, or private or public legal entities. Though, if the obligation or debt which is being eluded is of public Law and the creditor a public legal entity, or they are pecuniary obligations derived from a crime against the Public Treasury or the Social Security, the punishment to be imposed will be of imprisonment from one to six years and fine from twelve to twenty-four months. What supposes an important increase of the maximum limit of the punishment.
On the other hand, in the fourth point of the article 257 the punishments stated in the first point as well as in the special case of the third, will be imposed in their superior half when the value of the goods fraudulently transferred surpasses the 50.000 euros or are affected a high number of creditors (art. 250.1.5º CP), or when, the fraudulent transfer is committed with abuse of the personal relationship between debtor and creditor, or taking advantage the former of his business or personal credibility (art. 250.1.6º CP).
Finally, in the fifth point is expressly stated that the crimes included in the article 257 can be committed even when a bankruptcy proceeding is initiated. Remember that, the type demands that the behavior should be executed “in prejudice of the creditors”, not existing a crime of fraudulent transfer when a debtor chooses to pay before some creditors rather than others, even when is not complied the order of credits of the bankruptcy proceeding initiated.
– Article 258:
Let us see first the exact content of the article 258:
“Article 258:
1. Will be punished with a punishment of imprisonment from three months to one year or fine from six to eighteen months who, in a procedure of judicial or administrative execution, presents to the authority or public servant in charge of the execution an uncomplete or false relation of goods or patrimony, and with it prolongs, hinders or impedes the satisfaction of the creditor.
The relation of goods or patrimony will be regarded incomplete when the debtor executed uses or enjoys the goods pertaining to thirds and does not provide enough justification which justifies such enjoyment and the conditions to which it is subject.
2. The same punishment will be imposed when the debtor, required for this, does not provide the relation of goods or patrimony to which is referred the previous point.
3. The crimes to which is referred this article will not be pursuable if the author, before the authority or the public servant has discovered the incomplete or false character of the list presented, appears before them and shares a complete and true declaration of goods or patrimony.”
In the article 258 are described two typical behaviors. The former, is referred to those who being in a procedure of judicial or administrative execution, presents to the authority or public servant in charge of the execution an incomplete or false list of goods or patrimony. And the second to those who do not present a list of goods or patrimony.
If we pay attention, there exists another difference between them, while in the first one it is demanded that the uncomplete or false list of goods or patrimony should prolong, hinder or impede the satisfaction of the creditor, in the second one nothing of the sort is mentioned. It could be interpreted, in the sense that in this second scenario, would be enough with not handing over the list of goods or patrimony for understanding fulfilled the objective type. However, this has not been the interpretation of the precept of the Spanish Courts, at least, in the example that I have found it is necessary that lack of presentation of the list should prolong, hinder or imped the satisfaction of the creditor. The Spanish Provincial Court of Huesca´s sentence says: “3. The precept distinguishes, therefore, two behaviors, one active and other omissive: the presentation of uncomplete or false list and the omission of the presentation of the own list of goods or patrimony, respectively. In the former, it is required that the false declaration should be important, in a way that it prolongs, hinder or impedes the satisfaction of the credit, but not in the second, the one which is object of accusation. It could be maintained, therefore, that the mere neglect of the requirement would fulfill in any case the demands of the article 258.2, but we are inclined to demand also such result (that the lack of presentation of the list of goods and patrimony should prolong, hinder or impede the satisfaction of the creditor). We align ourselves with the predominant doctrine of the Provincial Courts, like the defended by the sentences of the Provincial Court of Madrid, section 23, of 22 November 2022 (sentence 611/2022), of Valencia, of 19 July 2022 (sentence 372/2022) and; of Tarragona, of 5 November 2021. It is a reasonable interpretation of the penal type taking into account the legal goods protected by it, like the Provincial Court of Valencia´s sentence says. The penal Law is based in the principle of minimal intervention, what implies that it should be used only as the last option, when there is no other way of protection less invasive, something which is not compatible with automatically punishing as crime of the article 258.2 the debtor who does not provide the list of goods or patrimony demanded by the Court. On the other hand, we do not appreciate reasons to demand the requisite of prolonging, hindering or impeding the satisfaction of the creditor when the false list concurs and not when it is not presented.”
Regarding the subjective type, both behaviors are malicious, thus, the active subject should intentionally hide his patrimony, whether presenting an uncomplete or false list of goods or patrimony, or not presenting any.
Finally, the third point of the article 258 adds an exemption, because the behaviors described will not be pursued when “the author, before the authority or the public servant has discovered the incomplete or false character of the list presented, appears before them and shares a complete and true declaration of goods or patrimony.”
– Article 258 bis:
The article 258 bis says:
“Article 258 bis:
Will be punished with the punishment of imprisonment from three to six months or fine from six to twenty-four months, except when they are already punished with graver punishment in other precept of this Code, who makes use of goods seized by public authority which have been constituted in deposit without being authorized to it.”
In this case, only is described one typical behavior, to make use of seized goods which have been constituted in deposit without being authorized to it.
Evidently, we are here again before a malicious crime, in which the active subject should be conscious of the fact that his behavior fulfills the requisites of the objective type.
Where do these goods come from? At least we can mention two sources, they may come from, the seizure to which is referred the article 589 of the Spanish Criminal Procedure Law (LECrim), “When from the investigation arise evidences of a crime against a person, the Judge will order the presentation of enough bail for guaranteeing the pecuniary liabilities which may be declared, agreeing in the same resolution the seizure of enough goods for fulfilling such liabilities if the bail is not given.”
These goods may be also seized goods according to the stated in the article 127 CP, “All punishment imposed for a malicious crime will entail with it the loss of the effects which come from it and of the goods, means and tools with which it was prepared or executed, as well as of the profits coming from the crime, whatever the transformations that they may have experienced.”
In this last case, we do not have to wait to a firm sentence declaring the seizure of the goods affected to the crime, the article 127 octies CP says, “With the end of guaranteeing the effectivity of the seizure, the goods, means, tools and profits can be apprehended or seized and put in deposit by the judicial authority from the beginning of the investigation.”
– Article 258 ter:
The article 258 ter says:
“Article 258 ter.
When according to the stated by the article 31 bis a legal entity is liable of the crimes comprehended in this Chapter, the following punishment will be imposed to it:
a) Fine from two to five years, if the punishment committed by the physical person has a punishment of imprisonment of more than five years.
b) Fine from one to three years, when the crime committed by the physical person has a punishment of imprisonment of more than two years not included above.
c) Fine from six months to two years, in the rest of the cases.
Attending to the rules established in the article 66 bis, the judges and courts may likewise impose the punishments established from the letters b to g of the point 7 of the article 33.”
This article puts into practice the stated by the article 31 bis CP, according to which the legal entities are only criminally liable of the crimes which expressly state it.
Víctor López Camacho.
Twitter: @victorsuperlope.
More on my website: www.victorlopezcamacho.com