A Brief Overview of Appeal Bonds
During litigation, defendants who take adverse monetary judgments in Superior Court may wish to appeal to the Court of Appeal. The filing of a Notice of Appeal does not automatically stay enforcement of the judgment, so an Appeal Bond or other instrument of suretyship is typically filed with the Superior Court to allow a defendant to withhold payment of the judgment until the process of appeal has run its course. If the defendant pays today and wins the appeal, he runs the risk of not being able to collect his funds back from the original judgment creditor if they have spent the money already.
Options for securing the plaintiff include lodging cash with the court, arranging for personal surety, or coming to an agreement with opposing counsel on some sort of compromise agreement.
However, the most common way to secure a judgment is by filing an Appeal Bond with the court. An admitted surety company can underwrite the principal, or its resources, from a financial perspective, and then offer terms to issue the bond. It will not be difficult for an agent to consult multiple surety companies and he or she should know which markets are best suited for any situation.
Some scenarios offer attractive alternatives to posting collateral for defendants. The surety’s financial underwriting will determine what can be done. If collateral is required to secure the bond, then it most likely will need to be in the form of cash or a bank letter of credit. Unencumbered real estate can sometimes be used in larger cases, but the process takes a long time and can be expensive.
What Attorneys Should Know About California Appeal Bonds
The attorney will be relied upon to prepare the bond wording and calculate the bond amount. The good news here is that California keeps these two aspects of the matter simple – to a degree.
California statutes suggest standard, fill-in-the-blank bond language so there should not be much, if any, negotiation over the wording; however, that language is not required. Our office nearly always sees the standard wording used.
The state also keeps the calculation of the bond amount simple. The amount of the appeal bond must be 1.5 times the judgment (Code Civ Proc., § 917.1, subd. b). The same amount is used if lodging cash security directly with the court, but a higher amount would be used if going the personal surety route, which is not often used. Additional refinement might apply, but we nearly always see that as the case. Visit Code Civ Proc., § 917.1 for full details.
Unfortunately for California litigants, the 1.5 times the judgment rule is steeper than what they would find in most – possibly all – other states. One silver lining can be found in Rule 26(c), which lists recoverable costs and includes the cost of obtaining an appeal bond. An experienced attorney might even use this nugget as a negotiating tactic prior to obtaining the bond.
In some ways, California keeps certain aspects of the appeal bond process easy, while others are a little more problematic. Qualifying for a bond on an uncollateralized basis can be quickly determined. If collateral is required, then cash is the fastest route to go, while a letter of credit will hold up the process until the bank has issued its document, so our best advice is to reach out early to a bond agent to discuss the defendant’s financial situation. A brief chat can shed light on what a judgment debtor might be facing, even if done generally in nature.