Staying Judgment with Appeal Bonds

In California, a court appeal bond, also called a defendant’s appeal bond, is a type of Surety bond required to secure the right to appeal to the higher court and stay the judgment delivered by the lower court. Based on the shreds of evidence presented, the appeal court can modify or reverse the trial court’s previous decision. As a result, the bond guarantees that the appellant can commit to the final ruling if they lose the case.

In most jurisdictions, an appeal bond covers the court-mandated amounts and expenses, such as accrued interests and legal costs incurred by the other party. The purpose of the appeal bond is to protect judgment creditors and other legal stakeholders from frivolous appeals or tactics to delay payment.

An appeal bond benefits both parties involved in the case. The Appellant does not have to pay the court-mandated sum until the appeal process is exhausted and they pay only if the court upholds the lower court’s decision. Conversely, the Plaintiff is assured of payment if they win the case.

How are Appeal Bonds Underwritten

Due to the high risk involved, Sureties require principals to pledge collateral worth at least 100% of the bond amount. While the premium to be paid varies by Surety and the type of collateral given.

The amount of the bond is governed by state regulations. In California, the bond amount should be 150% or 1.5 times the judgment amount. A Surety may consider providing a bond without collateral to companies or individuals with a strong financial standing.

Collateral

The most common types of collateral that sureties accept are cash and letters of credit from banks. These two types of collateral are widely used due to their liquidity and low risk.

Cash

Many people believe that it is better to post cash directly with a court than obtaining a bond, as it would involve paying a premium. But that’s simply not true! Instead, there are several advantages of using cash as collateral to obtain an appeal bond.

Many Sureties pay interest on cash deposits, whereas courts pay little to no interest. Some courts even charge for cash deposits. Interest rates on cash deposits vary from Surety to Surety but usually fall in the 1-1.5% range.

Some sureties even have programs for principals with large cash deposits. These programs allow appellants to invest in short-term U.S. treasuries. Another benefit of using cash as collateral is that the amount can be wire transferred to the Surety in minutes and the bond can be in place in a few days.

Letters of Credit

Banks are able to issue letters of credit. A letter of credit assures the Surety payment up to a certain dollar amount, which is typically equal to the bond amount. The bank should be approved by the Surety.

People who maintain a good relationship with their bank may be able to obtain a letter of credit within a week or two. However, principals who do not have an established relationship with their bank might have to wait longer.

Real Property

Some Sureties will consider Real Property collateralization. Premiums are generally higher than other collateral forms and there can be additional expenses on top of the premium for any required appraisals or title fees, but in the absence of other available liquid forms of collateral, Real Property can serve as an excellent collateralization option.

H.M. Vreeland is a renowned Surety bond company serving California. Whether you want a probate bond, contract bond, or another other type of bond, we have got you covered. To discuss your requirements with our team, call (415) 566-3401.