Appeal Bond vs. Cash Deposit with the Court

An appeal bond, also called an appellate or supersedeas bond, is a surety bond required when appealing a lower court’s decision to delay judgment payment in a higher court. If the appellate court upholds the lower court’s verdict and a claim is made against the appellant’s California court appeal bond, the surety pays the judgment. The principal is then required to reimburse the surety company for all payments made.

Many people misuse their right to challenge the lower court’s decision wasting time and other resources of courts. The California court appeal bond discourages this dishonest behavior, protecting courts against frivolous cases.

If you want to challenge a lower court’s decision in a higher court, and the judge requires you to obtain an appeal bond, you have two options:

a) you can either procure an appeal bond, or
b) place a cash deposit equal to the bond amount directly with the court

Why Obtain a Surety Bond Instead of Depositing Cash with the Court?

A compelling reason to obtain an appeal bond is that it frees up the principal’s capital. With an appeal bond, you only need to make an annual premium payment of one or two percent of the bond amount. However, if you decide to deposit cash with the court, you may lose access to a significant portion of your capital (your capital remains locked till your case is settled), which otherwise could have been invested.

Furthermore, when cash is placed in a court’s account, the interest generated benefits the court, not the principal. In many cases, the fee for placing a deposit with a court is higher than the premium for the bond posted. Thankfully, California courts do not charge a fee for depositing cash with them.

Retrieving money deposited with a court can be a time-consuming and arduous process. A court may take several days, weeks, or even months to respond to your requests. Many state courts are overburdened and understaffed and may get overwhelmed when several bondholders make requests to retrieve deposited money.

Reputable surety companies, on the other hand, offer world-class customer service. Their team consists of experienced customer service professionals trained to understand client concerns and suggest the most appropriate bonding solutions. Surety companies are equipped to tailor bonding solutions to their clients’ unique needs and move swiftly to address client concerns.

Here are some other benefits of posting an appeal bond:

➢ Surety companies accept various forms of collateral, such as cash, letters of credit from banks, real estate, and marketable stocks and bonds in non-retirement accounts. These collaterals provide individuals with flexibility when meeting bond requirements. Many surety companies may waive the requirement for a collateral for financially healthy clients.

➢ If the court reverses the lower court’s judgment, ruling in your favor, the surety will quickly close the bond file and release the collateral (after they’re cleared of all bond obligations)

How are Appeal Bonds Underwritten?

Appeal bonds are considered high-risk, and surety companies aim to safeguard against potential losses when claims are filed. To achieve this, most surety companies have a requirement for individuals and businesses seeking an appeal bond. They are typically asked to provide collateral equal to 100 percent of the bond amount. When you apply for an appeal bond, the surety reviews your financial statements to determine if you can meet your payment obligations.

Many sureties may not require high net worth individuals, large private corporations, publicly traded companies, or any other entities with strong financial health to post collateral.

Can an Appeal Bond be Modified?

A rider is usually issued by the agent on behalf of the surety. It specifies the nature of the change being made. A rider should include a notary and the surety’s power of attorney. It can be used to modify just about any information in the appeal bond. If one or more parties to the agreement want to modify the case caption or civil code section, a rider can usually be issued quickly. In case the change relates to the principal, the surety’s indemnity agreement may need modifications (if the principal is not already a party to it).

H.M. Vreeland is committed to simplifying the process of obtaining surety bonds. We educate our clients about different types of surety bonds, so they can weigh their pros and cons. By empowering our clients with knowledge, they can make informed decisions that align with their specific needs and objectives. To learn more, call us today at (415) 566-3401.