Case Study on Brazil. Reflections on the Social Function of Property in Brazil. By: Wagner Lenhart, Instituto Liberdade INITIAL CONSIDERATIONS

Transcription

1 Case Study on Brazil. Reflections on the Social Function of Property in Brazil By: Wagner Lenhart, Instituto Liberdade INITIAL CONSIDERATIONS The evolution of civilization is closely associated to the development of instruments and institutions which make social interaction easier, create favorable environments and stimulate exchange among individuals. In this sense, the most important institution perceived and improved by man is private property. After all, the right of using, enjoying and disposing of their assets, ideas and efforts, have the power of, at first, assuring freedom to man. To truly be free, man needs to assure that all the spheres of his property will be guaranteed by the social organization. Also, the institution of private property gives him the opportunity for economic prosperity, as it generates greater safety and ease to invest, transact, interact and maximize the use of existing resources. The importance of the analysis and continuous study of this institute is unquestionable and led to the writing of the present article, which analyzes property rights in the Brazilian legal system. More specifically, it analyzes one of the elements that characterize property right in Brazilian lands, namely, the social function of property. The Brazilian Constitution promulgated in 1988, when addressing the fundamental rights and guarantees, sets forth the following 1 : Article 5 All persons are equal before the law, without distinction of any nature, assuring to Brazilians and foreigners resident in the Country, the inviolability of the right to life, liberty, equality, safety and property in the following terms [ ] XXII - the property right is guaranteed; XXIII - the property will accomplish its social function; XXIV - the law will establish the procedure for expropriation for public need or utility, or social interest against previous and fair indemnification in cash, with exception of the cases foreseen in this Constitution; XXV - in case of imminent public threat, the competent authority can use a private property, assured to the owner, ulterior indemnification if there is damage; XXVI - the small agricultural property, thus defined by law, since that it is worked by the family, will be not object of attachment for payment of debts from its productive activity, providing the law for the means of financing its development; 1 Constituição da República Federativa do Brasil de

2 From the reading of the provisions above transcribed, it is possible to conclude that the property right is considered a fundamental right guaranteed to the Brazilians and the foreigners resident in the country. Furthermore, it is concluded that the Federal Constitution that enrolls the property as a fundamental right, at the same time establishes provisions which weaken this right, creating limitations and confusing conditions for its enjoyment. Really, it is dominant among Brazilian scholars that the right to property is not an absolute right and property should be limited and relativized. This is what the constitutional text signals when it defines, for example, that property shall accomplish a social function and can be expropriated for social interest 2. Within the institutes limiting or relativizing property rights in the Brazilian legal system, such as administrative limitations, urban recording as historic sites, establishment of special zones of social interest and compulsory subdivisions, constructions and uses, the present study intends to analyze the denominated social function of property. For this purpose, it will be examined, at the first moment, what is understood by social function of property in Brazilian law, and then, it will evaluated the impact of such institute on the economic dynamics of the country. 1. The social function of property in the Brazilian law As mentioned in the initial considerations, the right to property is not absolute in the Brazilian legal system. In fact, there are several constitutional and legal provisions granting governmental bodies the powers of intervention in private property and even discretionary mechanisms of expropriation, as it is in the case of expropriation for non-accomplishment of the social function of property. In this line Manoel Gonçalves Ferreira Filho 3, featured Brazilian scholar, states: Recognizing the social function of property, without denying it, the Constitution does not deny the exclusive right of the owner on the thing, but requires that the use of the thing is conditioned to the general well-being. Therefore, the constituent was not far from thomistic conception that the owner is an attorney of the community for management of goods dedicated to serve everybody, although they do not belong to everybody. In Brazil, if property does not accomplish its social function, the State can impose punishment to the owner and carry out the so-called expropriation-sanction, in which the owner s will does not 2 LENZA, Pedro. Direito constitucional esquematizado 11. ed. rev., atual. e ampl. São Paulo: Editora Método, 2007, p FERREIRA FILHO, Manoel Gonçalves. Curso de Direito Constitucional 36. ed. rev. e atual. São Paulo: Saraiva, 2010, p

3 matter or is of little importance. The indemnification is paid in public debt securities 4 or agrarian debt bonds for cases in which the Federal Government expropriates with the aim to promote the agrarian reform 5. The reasons and procedures of punishment for non-accomplishment of the social function, as well as the own understanding of the said social function, differs depending on the nature of the property: whether it is urban or rural. When the property is urban, non-accomplishment of the social function as set forth by the Federal Constitution and the Federal Act no , of , can result in the following penalties: a) procedure of compulsory subdivision, building or use, in which the Public Power can impose to the property owner, an obligation to do, establishing conditions and terms for the implementation of such obligation; b) imposition of progressive IPTU (Municipal Real State Tax) in which the Public Power imposes an increased tax rate over the term of five consecutive years and c) expropriation-sanction, when the owner does not accomplish the obligation to parcel, build or use the property and after the five years term of the progressive tax collection the Public Power can expropriate the property, indemnifying the owner with public debt securities, redeemed within the term of 10 years in annual installments, equal and successive. In these cases, the Municipal Public Power has the prerogative to impose such sanctions if it understands that the urban land is not being used in an appropriate manner. What would be the social function of urban property? When is urban land not used in a suitable manner? In the terms of the Federal Constitution, urban property accomplishes its social function when it meets the fundamental requirements of the city order established in the respective land-use 4 Constituição da República Federativa do Brasil de Article 182. The urban development policy, performed by the municipal Public Power, according to general guidelines established in the Law, aims to order the full development of the social functions of the city and ensure the well-being of its inhabitants. Paragraph 1 The urban master plan, approved by the Municipal Council, compulsory for cities with more than twenty thousand inhabitants, is the basic instrument of the development and urban expansion policy. Paragraph 2 The urban property accomplishes its social function when meets the fundamental requirements of order of the city expressed in the urban master plan. Paragraph 3 The expropriations of urban properties will be made with previous and fair indemnification in cash. Paragraph 4 The municipal Public Power has, by means of an act specific for an area included in the urban master plan, the right to require, in the terms of the federal law, the owner of the urban land not built, sub-used or not used, to promote its suitable exploitation, under penalty of, successively: I - compulsory subdivision or building; II municipal real state tax progressive over time; III - expropriation with payment by means of public debt securities with issuance previously approved by the Federal Senate, with redemption term of until ten years, in annual installments equal and successive, assured the real value of the indemnification and legal interest. 5 Constituição da República Federativa do Brasil de Article 184. It is up to the Federal Government to expropriate for social interest, for agrarian reform purposes, the rural property that does not accomplish its social function, by means of previous and fair indemnification in agrarian debt bonds, with a clause for real value preservation, callable in the term of until twenty years, from the second year of their issuance and of which use will be defined in the law. Paragraph 1 The useful and necessary improvements will be indemnified in cash. Paragraph 2 The decree declaring the property as of social interest, for agrarian reform purposes, authorizes the Federal Government to propose the expropriation action. Paragraph 3 It is up to a supplementary law to establish a special contradictory procedure, by fast track, for the legal expropriation proceedings. Paragraph 4 The budget will set annually the total volume of agrarian debt bonds, as well as the amount of resources to meet the agrarian reform program in the current fiscal year. Paragraph 5 It is exempted of federal, state and municipal taxes the operations of transfer of properties expropriated for agrarian reform purposes. 3

4 planning. Each Brazilian city gifted by a land-use planning, therefore, has its own provisions about the social function of urban property. Anyway, the doctrine points the general lines and highlights that property accomplishes its social function in an urban environment when it does not generates social disorder, lack of housing, unemployment, disordered modifications in the land occupation and radical transformations of the urban overview. Regarding rural property, the non-accomplishment of the social function of property can result in property expropriation. In this case, the Federal Government, under the foundation of social interest, for the purpose of agrarian reform, can, by means of indemnification in agrarian debt bonds redeemable in a term of 20 years, expropriate the property. In case of rural property, accomplishing the social function of property, according to the Constitution (Article 186), presupposes the simultaneous meeting of four requirements of variable measurement, namely: a) rational and suitable use; b) suitable use of the available natural resources and environment preservation; c) observance of the provisions regulating the labor relationships; and d) exploration that favors the well-being of owners and workers 6. In this sense, it is interesting to transcribe the word of Celso de Mello, Minister of the Supreme Federal Court, in a vote released in the Specific Appeal in Mandamus no , which is about the social function of rural property 7 : The access to the land, the solution of social conflicts, the rational and suitable use of the rural property, the appropriate use of the available natural resources and the preservation of the environment constitute, undeniably, elements of the accomplishment of the social function of property. The expropriation, in this context while constitutional sanction to the non-accomplishment of the social function of property (JOSÉ AFONSO DA SILVA, Curso de Direito Constitucional Positivo, p. 281, item n. 13, 32ª ed., 2009, Malheiros), reflects important instrument dedicated to give consequence to the commitments undertaken by the State in the economic and social order. This means that the land owner is tasked of the legal-social obligation of properly cultivate and explore it, under the penalty of incur in the constitutional and legal provisions which sanction to the owners of idle, non-cultivated and/or unproductive properties, because it is only met the social function which conditions the exercise of the property right, when the owner of the domain accomplishes the obligation (1) of favoring the well-being of those working there; (2) of keeping satisfactory productivity levels; (3) of assuring preservation of the 6 HORTA, Raul Machado. Direito Constitucional 5. ed. rev. e atual. Belo Horizonte: Del Rey, 2010, p SUPREMO TRIBUNAL FEDERAL. Agravo Regimental em Mandado de Segurança nº , Relator Ministro Celso de Mello, julgado em 17 de junho de Available at: < Access on: September 23,

5 natural resources, and (4) of observing the legal provisions which regulate the fair labor relationships between those possessing the domain and those cultivating the property. It is important to reaffirm that the property right is not covered of absolute character, as it weighs on it a serious social mortgage, which means that, not accomplished the social function which is inherent to it (CF, Article 5, XXIII), the state intervention will gain legitimacy in the private domain sphere; nevertheless, observed for this effect, the limits, the forms and the procedures provided for in the Republic Constitution itself. As you can see, in the social function of both urban and rural property, in the Brazilian legal system, the start is always from the premise that the Government should ensure that the exercise of the propriety right is limited by the community s interest, or in other terms, that the enjoyment of this right brings advantages not only for the owner, but for the society as a whole 8. The problem here is not the purpose that the property right benefits the society in general. This, all righteous people wants, and the existence itself of the property right, already ensures. The problem lies in giving to the government the power to impose sanctions and expropriate the private property based on vague, dubious or opened concepts, like the social function of property. Indeed, the social function of property lacks a clear and objective definition and is based on inaccurate concepts which leave room for the most diverse lines of interpretation, generating the undesirable effect of legal insecurity. In the manner that is provided in the Brazilian legal system, the definition of the social function is entirely at the discretion of the rule applicator and his/her ideological conceptions or particular interests, which leaves room for distinct interpretations and thence legal insecurity, represented by the high number of lawsuits. The reflection written by Bernardo Santoro 9 is interesting: Focusing the idea common to all definitions, social function of property is the institute which legalizes the government intervention in the private property under the argument of a relevant public interest, suppressing or extinguishing the power of the individual over the property earlier fully private. Therefore, the philosophical basis of this intervention is the public interest. Public interest, according to the classic administrative law doctrine, is the achievement of the common good. Then the government can suppress or extinguish the private property of the people, in view of the common good, and the idea of 8 DEBONI, Giuliano. Propriedade privada: do caráter absoluto à função social e ambiental: sistemas jurídicos italiano e brasileiro. Porto Alegre: Verbo Jurídico, 2011, p. 117 e SANTORO, Bernardo. Por que não existe propriedade privada de imóveis no Brasil. Disponível em: < Access on: September 22,

6 common good changes according to the politic and economic philosophy of a government. Some governments can think that a given property aims the common good only if it reaches certain amount of rice produced, or if that property is dedicated to commerce and not for housing. [...] When the Constitution provides that a man can only exert the ownership if he meets the common good, which is a fluid concept, it is being effectively denied this man s right to possess a private property. The legal system itself defines ownership the right to use, enjoy and dispose of the thing, besides the right to recover it from who unfairly possesses or holds it. If this use, fruition and disposal of the property are subject to the will and approval of government bureaucrats, under the argument of a common good volatile and indefinable, so in fact the property owner is the state, and the individual is a mere holder of the thing (not even a possessor he/she is, as he/she ends up exerting in fact the power on the property on behalf of the state and in its terms). It is true that the property right, as already referred to, is listed as a fundamental right in the Brazilian Constitution. It is also true that the homeland courts, as a rule, reject the illegitimate employment of the expropriator instruments and value the due process of law 10. However, the institute of the social function of property, understood in a dominating manner by the doctrine and the national courts, as an advance with regards to rights in rem, generates for its own nature and its intrinsic conceptual scope, a culture of devaluation and disrespect to the private assets. More, it generates legal insecurity, repeated cases of arbitrary conduct by the public administration and, as a logic corollary, negative impacts on the country s economy, as it will be highlighted as follows. 2. Impact of the social function of property on the Brazilian economy In Brazil, it is understood that the property right has undergone an evolutionary process which comes from the individualist and absolute conception of property, to that covered by a social and environmental character 11. According to this understanding, the institute of the social function of 10 Nothing justifies, however, the illegitimate employment of the expropriatory instrument when used by the state power with evident transgression of the principles and rules which direct and discipline the relationships between the people and the State. It is essential not to lose the sight that, no matter how relevant it may be the foundations of the expropriatory action of the State, it cannot and also should not disrespect the due process of law clause, which conditions any activity of the State tending to affect, among other rights, that regarding the private property. (Supremo Tribunal Federal. Agravo Regimental em Mandado de Segurança nº , Relator Ministro Celso de Mello, julgado em 17 de junho de 2015) 11 DEBONI, Giuliano. Propriedade privada: do caráter absoluto à função social e ambiental: sistemas jurídicos italiano e brasileiro. Porto Alegre: Verbo Jurídico, 2011, p

7 property, dealt with in the previous paragraphs, would be a welcome advance which would bring beneficial results to Brazilian society. However, such a position can and should be questioned. Firstly, it is important to make some considerations, even briefly, about the private property. It is well known that the private property concept precedes the Modern State and its theoreticians. The notion of property dates back to unmemorable times. Indeed, as states Richard Pipes, in his precious study called Property and Freedom, the idea that the human race lived without the notions of mine and yours is part of mystical past or, in his own words, the vision of real world without property should not be founded in the collective memory but in a kind of collective nostalgia. It is inspired by the belief that status and richness inequities are not natural. 12 The own biblical commandments are living-together rules which aim at better social cooperation and in this sense, in the case of the eighth commandment, it already sharply pointed to the importance of private property when imposing the negative right: not steal. But it is with the Modern State creation the property right arises, in the legal sense of the word or, as is referred to by Pipes when conceptualizing property such as we known 13 : Property refers to the right of the owner or owners, formally recognized by a public authority, both for exploring goods by excluding any other people and in order to have them for sale and other commercial purposes. What distinguishes ownership of a mere transient possession is that the ownership is a claim which shall be reinforced by the society, the State, the customs, the conventions and the law. So, the state entity, holder of the coercion power, received the task to make accomplished the property rights, thus generating greater safety for the owners and consequently greater social peace and stimulation of human interaction. However, over time, schools of thought criticizing the property right arose, some of which propose its immediate abolition, others defend the State limiting it through institutes like the social function of property. As previously seen, the Brazilian Constitutional Charter recognizes the property right as a fundamental right but does it with exceptions, setting a series of gaps in order for the public power to deconstitute it. It happens that this position weakens the right protected, in this case the property, resulting in a series of detrimental effects, such as the complacency with land invasion acts and crimes against property and increase of the legal insecurity. In fact, when a right is relativized, as occurred with the property right in the Brazilian legal system, the culture of invasions performed by the Landless Workers Movement (MST), vandalism done by groups of delinquents and crimes related to property ends up in a certain way, being accepted by governmental authorities and the society. 12 PIPES, Richard. Propriedade e Liberdade. Rio de Janeiro: Record, 2001, p PIPES, Richard. Propriedade e Liberdade. Rio de Janeiro: Record, 2001, p

8 Rulers complacency and the sympathy from part of the society with groups that still disrespect the property right demonstrate with remarkable clarity the damage that institutes relativizing the private property, like the exigency to meet an imprecise social function, can cause. They prove the hard truth that the property in Brazilian lands is seen by a considerable portion of the society as an instrument of oppression favoring the richer classes and not as what it really is: the most important bastion for freedom, prosperity and human dignity. What worries most, in this sense, is that the Brazilian society seems to have arrived to something very near a consensus which naturally accepts a heavy intervention of the State in the individuals life, either by compulsory expropriation (taxation) or the limits imposed to the property right and the contract autonomy. In this tone, Silvio de Salvo Venosa, a renowned Brazilian jurist, states that 14 : All the property, even if respected the owner s right, should accomplish a social function [...] It is up to the State also to regulate its intervention whenever the riches are not well used or relegated to abandonment, redistributing them to those interested and capable to do it. The State appears like a universal panacea. It is up always to well-intentioned state entity to define what means to use well the property or define who is able to use it in the most suitable way for the society. This common sense which puts the State, its servants and politic agents on the top of a pedestal of reasonability and impartiality, makes worry all those seeing in the private property not only the most extraordinary institution for building a prosperous society, but also the main safeguard for maintenance of individual freedom. The belief that it is up to the State to establish and ensure that the properties accomplish a determinate social function ignores two basic issues. First, it does not realize that governments do not easily correct occasional market failures, instead, its bureaucratic and intervening structures tend to worsen the problems. This occurs because the information and incentives making the markets so dynamic and effective are not available for the governmental bureaucracy, so that the so extolled public interest ends up not being reached and some interest groups end up receiving illegitimate privileges 15. In the same way, it is worth remembering that the politic agents have their own interests and invariably represent specific groups, which allows them to make decisions and use government resources for offering benefits to whom elected them. Second, they forget that the best way that private property performs its social function is through unequivocal respect to the owner s rights, namely, the property by itself accomplishes the most relevant social function. Its existence and its respect are, as already referred to, the fertile terrain which offers to the society the best opportunities of economic and social development. 14 VENOSA, Silvio de Salvo. Direito Civil Direitos Reais Volume 5. 3.ed. São Paulo: Editora Atlas, p. 156 e MITCHELL, William C. Para Além da Política. Rio de Janeiro: Topbooks, p

9 The illusion that granting to the government powers of limitation and intervention on property will serve as a catalyst for social progress is just that: an illusion. After all, for the imperfections inherent to governmental action, the coercive power of the State will end up being used as a function of individual or corporative interests or, in case the public entity reaches a rare sense of impartiality, by the lack of stimuli and suitable information, will end up distorting the economic logic and generating more inefficiency and less prosperity. The truth is that property, even unproductive, should not be an object of State coercion. When granting to the State the power to define who will have its property protected or not, the society is, in first place, putting in the hands of the rulers an excessive power and limiting its own freedom. Secondly, it is authorizing the government to strongly intervene in economic progress, which traditionally generates distortions and damages. In this sense, we must take this opportunity to mention a valuable Adam Smith s teaching 16 : The statesman who tried to guide private individuals for the way they should apply their capitals, would not only be required to have the most unnecessary care but also would assume an authority that would not be wise to entrust to not only one person but even to any council or senate, an authority that could not be deposited in a place more dangerous than on the hands of a man fool and presumptuous enough to imagine himself able to exert it. Thus, the institute of the social function of property negatively impacts the economy in three ways. First, it weakens the importance and value of private property, which stimulates, even unintentionally, its disrespect and a generalized complacency with those violating it. A recent example proving this situation and the damage it caused, is the invasion on March 5, 2015, of a paper and cellulose factory located in the city of Itapetininga, in the State of São Paulo, by around one thousand people, which destroyed thousands of transgenic seedlings, as well as part of the unit facilities 17. Second, it allows the government authority, naturally unfit to this activity, through mechanisms of penalties for not accomplishing the social function of property, to intervene in the market dynamics, generating distortions and thence economic damage. Third, it generates for its evident imprecision and conceptual scope, a significant legal insecurity, as the owner is always in some doubt whether he/she is accomplishing the social function that the government authority expects from him/her and at which time, under which circumstances and in which extension such an authority can impose the sanctions foreseen in the legal system. Uncertainties from this nature strongly contribute for the enormous number of proceedings of all matters conducted in the Brazilian Judicial Power. According to data collected by the National Justice Council (CNJ), disclosed in September 15, 2015, Brazil reached the mark of 100 million proceedings in 16 SMITH, Adam. A Riqueza das Nações Volume I. São Paulo: Martins Fontes, p G1 - Globo. MST invade fábrica e destrói milhares de mudas geneticamente modificadas. Available at: < Access on: September 22,

10 progress, summed up all proceedings of all courts, which represents one proceeding for each two Brazilian citizens 18. Thus, the relativization of the private property institute, adopted by the Brazilian legal system, clearly has a negative impact on the economic dynamics of the country, especially through the requirement of accomplishing a social function by the property. The weakening of this institute, the state intervention and the legal insecurity crowd out the investments, leading to a less efficient allocation of available resources and even to a destruction of existing goods. Final considerations As seen in the present study, Brazil recognizes the property right as a fundamental right. However, such recognition is made with exceptions and the right is relativized by several mechanisms of state intervention in the private domain. It is true that these intervention mechanisms are founded on constitutional and legal rules and are subject to the due process of law. It is also true that the homeland Courts, when examining cases which involve property right limitation, tend as a rule to reject unreasonable or arbitrary conducts practiced by government entities. Although the existence of legislative provision and judicial review, there is no way to ignore that the existence of the institute of the social function of property, for its own nature and its wide and imprecise concept, results in negative effects like a culture of devaluation and disrespect to private property, legal insecurity and arbitrary acts by the public administration. Such negative effects, of course, affect the Brazilian economy, which is harmed by the lack of a more solid protection of the property right. These harms are represented, for example, by the insecurity that should be accounted at the time to make investments in the country and by the distortions created by state intervention in the economic domain. The institute of the social function of property, with the argument to benefit the society and stimulate economic progress, ends up generating results opposite to those intended and damages the Brazilian society and economic development. It is essential for us, that the property right in Brazil should be really considered a fundamental right, defended with conviction and left free of relativization. It is difficult to imagine at this moment, given the majority understanding of the Brazilian politicians and jurists, a constitutional reform excluding the institute of the social function of property from the homeland legal system; however, it is possible to state with conviction that the abolition of such an institution would bring great benefits to the country, the economy and its people. After all, this would strengthen the culture of valuating the private property, limit state intervention in the economic dynamics and move away the legal insecurity, attracting and stimulating investments and all the positive deployments that the private property, when rigorously respected, offers to the society that adopts it. 18 CONJUR Consultor Jurídico. Justiça em número: Brasil atinge a marca de 100 milhões de processos em tramitação na Justiça. Available at: < Access on: September 22,

11 REFERENCES BRASIL. Constituição da República Federativa do Brasil de Available at: < >. Access on: September 23, CONJUR Consultor Jurídico. Justiça em número: Brasil atinge a marca de 100 milhões de processos em tramitação na Justiça. Available at: < Access on: September 22, DEBONI, Giuliano. Propriedade privada: do caráter absoluto à função social e ambiental: sistemas jurídicos italiano e brasileiro. Porto Alegre: Verbo Jurídico, FERREIRA FILHO, Manoel Gonçalves. Curso de Direito Constitucional 36. ed. rev. e atual. São Paulo: Saraiva, G1 - Globo. MST invade fábrica e destrói milhares de mudas geneticamente modificadas. Available at: < Access in: September 22, HORTA, Raul Machado. Direito Constitucional 5. ed. rev. e atual. Belo Horizonte: Del Rey, LENZA, Pedro. Direito constitucional esquematizado 11. ed. rev., atual. e ampl. São Paulo: Editora Método, MITCHELL, William C. Para Além da Política. Rio de Janeiro: Topbooks, PIPES, Richard. Propriedade e Liberdade. Rio de Janeiro: Record, SANTORO, Bernardo. Por que não existe propriedade privada de imóveis no Brasil. Available at: < Access on: September 22, SMITH, Adam. A Riqueza das Nações Volume I. São Paulo: Martins Fontes,

12 SUPREMO TRIBUNAL FEDERAL. Agravo Regimental em Mandado de Segurança nº , Relator Ministro Celso de Mello, julgado em 17 de junho de Available at: < >. Access on: September 23, VENOSA, Silvio de Salvo. Direito Civil Direitos Reais Volume 5. 3.ed. São Paulo: Editora Atlas,