Judicial bonds consist of two general classes. The first are fiduciary bonds. These guarantee that persons entrusted with the care of property of others under various forms of estates will exercise their duties faithfully, account for all property received and make good any deficiency for which the courts—probate or equity—hold fiduciaries liable. For more information on fiduciary bonds, see Fiduciary Bonds.
Court bonds (sometimes referred to as litigation bonds) are the second class of judicial bonds. These are chiefly concerned with actions in equity involving antagonistic interests. For example, a court bond is often required when a party to a lawsuit seeks permission of a court to perform an act for which he claims a legal right, but which would result in an unjust loss or injury to the other party if the court ultimately decides he does not have that right. The bond, therefore, guarantees the payment of damages, court costs or both if the person bonded is unsuccessful in his action.
Court bonds—classes
Plaintiffs and defendants bonds
Attachment and release attachment bonds
Replevin and counter-replevin bonds
Injunction and dissolve injunction bonds
Appeal bonds
Bail bonds
Bail bond agents
Collateral security
Bond forms
Court Bonds—Classes
Court bonds, as previously noted, are a class of judicial bonds that deal with actions in equity rather than in court of law for money damages or in probate court concerning faithful disposition of property of others. The primary purpose of court bonds is to protect a person (obligee) against loss in the event the principal (the person who purchases the bond) does not succeed in proving that he is legally entitled to the remedy he sought against the obligee.
Since various types of court bonds are required to fit a multitude of circumstances and each type of bond must comply with statutes and rules of court procedures of states, it is obvious that the scope of court bonds is as broad as the law itself. Though there are many types of court bonds in use, they can be classified into three groups: (1) bonds in civil proceedings, i.e., plaintiff and defendants bonds; (2) bonds in admiralty proceedings; and (3) bonds for release of persons in criminal proceedings, such as bonds for bail.
Plaintiffs and Defendants Bonds
Two major groups of court bonds involving civil proceedings are plaintiffs and defendants bonds. Plaintiffs bonds are issued to persons who commence actions against others in order to obtain some type of remedy other than money damages. These bonds guarantee that if the plaintiff is wrong in his action, the defendant will be paid for any damages sustained. Defendant bonds, on the other hand, are issued to targets of suits. Upon issuance of this type of bond, a defendant is allowed to regain possession of his property or to continue doing some act pending outcome of court action. If the court decides in favor of the plaintiff, the defendants bond guarantees that the defendant will pay the plaintiff for any damages sustained.
Generally, for each type of plaintiffs bond there is a comparable defendants bond (at least one exception is the bond for the discharge of a mechanics lien. This is purchased by an owner of property that has a lien filed against it for labor and materials costs made and due. The owner may discharge the lien pending outcome of liability by posting a mechanics lien bond. This guarantees payment of any amount, interest, and other costs, if judgment is made against the owner).
Following are descriptions of some of the more popular bonds of both types. The procedure here is to describe the bond for the plaintiff first and then its counterpoint for the defendant.
Attachment and Release
Attachment Bonds
UNDERTAKING ON ATTACHMENT (Plaintiff's)
WHEREAS, _____, plaintiff, has commenced an action in the above entitled Court, against _____, defendant, to recover from said defendant the sum of _____ Dollars ($), together with accruing interest, and has filed the necessary affidavits to obtain an order of attachment against said defendant.
NOW, THEREFORE, the undersigned (Surety Company) of _____ State of _____, does hereby undertake to _____, defendant, in the penal sum of _____ Dollars ($), that the plaintiff shall pay the defendant all damages and costs, not exceeding the above amount, which he may sustain by reason of the attachment in this action if said order prove to have been wrongfully obtained.
DEFENDANT'S DISCHARGE OR RELEASE ATTACHMENT BOND
WHEREAS, an order of attachment against the defendant in the above entitled action has been issued out of the _____ (District Court) _____, after a filing by the plaintiff of the necessary affidavits by statute provided; on a suit to recover the sum of _____ Dollars, together with accruing interest; and
WHEREAS, the sheriff, under said writ, did attach and place in his custody for safekeeping sufficient property to satisfy said sum; and
WHEREAS, the defendant desires a release of said property and a discharge of said order, and pursuant to the means by law provided has filed this bond to secure the plaintiff's claim if judgment be found for him.
NOW, THEREFORE, the condition of this obligation is such that, if the said defendant shall pay to the plaintiff in this action the amount of any judgment awarded thereunder against him, with interest and costs, if the plaintiff is successful against said defendant…
Analysis
An attachment bond is issued when the plaintiff wants to prevent the defendant from using, secreting, or disposing of property until the outcome of the court's decision. This bond guarantees that if the court decides against the plaintiff, the defendant will be paid any damages he may suffer as the result of having his property attached.
When the defendant's property is attached, it may at the discretion of the court be released provided the defendant posts a bond guaranteeing to pay the entire judgment and court costs should the court decide in favor of the plaintiff. A release of attachment bond is used in this case.
Replevin and Counter-Replevin Bonds
UNDERTAKING ON REPLEVIN OR CLAIM AND DELIVERY (Plaintiff's)
WHEREAS, it is alleged by _____, plaintiff in the above entitled action, that _____, defendant, has in his possession, and wrongfully (or unjustly) detained, certain personal property (or those certain chattels described as) belonging to the said plaintiff, of the value of _____ Dollars ($), to the possession of which said plaintiff is fully entitled; and
WHEREAS, the plaintiff, being desirous of having said property delivered to him and, by endorsement in writing upon the affidavit, has required the Sheriff of _____ County, State of _____, to take the said property from the said defendant.
NOW, THEREFORE, We, the undersigned surety company in consideration of the premises, and of the delivery of said property to the said plaintiff, do hereby undertake and acknowledge to the effect that we are jointly bound in the sum of _____ Dollars ($_), being double the value of said property, as stated in the affidavit, for the prosecution of the said action without delay and with effect, for the return of said property to the said defendant, if return thereof be adjudged, together with the defendant's costs in said action, or for the payment to the said defendant of such damages as may be recovered against the plaintiff, (Surety Company). . .
COUNTER-REPLEVIN, DEFENDANT'S CLAIM & DELIVERY OR RE-DELIVERY BOND
WHEREAS, _____, plaintiff, under and by virtue of an order and requirement duly made and issued in the above entitled action, and to him directed, did, on the _____ day of _____, A.D., 20__, take from the possession of the defendant in the said action the following described property, to wit:. . .
AND WHEREAS, the said defendant, _____, is desirous that the said property be redelivered to him by the said _____, plaintiff.
NOW, THEREFORE, the condition of this obligation is such that, in consideration of the premises, and the release of aid property to the defendant, that if the principal shall return said property to the plaintiff, if a return be decreed, in the same good order and condition as when released, and shall pay such costs and damages as may be awarded against him in said action. . .
Analysis
A replevin bond is similar to an attachment bond, except that it is issued when the plaintiff is suing for recovery of specific property and the court has permitted him to take immediate possession of property pending trial. As in the case of an attachment bond; this contract guarantees the return of the property to the defendant if the court decides against the plaintiff with compensation for any damage the court may decide the defendant has sustained.
A counter-replevin bond is issued in a replevin suit. It has the same effect as a release of attachment bond; that is, the defendant regains possession of the property pending decision of the court. However, if the defendant loses his appeal, the bond guarantees return of property to the plaintiff.
Injunction and Dissolve Injunction Bonds
PLAINTIFF'S INJUNCTION BOND TO DEFENDANT
WHEREAS, the above named plaintiff has duly applied to this court for a preliminary restraining order and a temporary writ of injunction against the defendant in this action, according to the statute in such cases provided.
NOW, THEREFORE, the condition of this obligation is such that, if the said plaintiff shall pay the said defendant such damages as he sustains by reason of said preliminary restraining order or temporary injunction, if the Court finally decide that the said plaintiff is not entitled thereto to either or any of them, if more than one defendant),. . .
DEFENDANT'S DISSOLVE OR DISCHARGE INJUNCTION
WHEREAS, the above named defendants, by temporary restraining order granted by the court in the above entitled matter, have been enjoined from _____ (for instance, the transfer of certain shares of the corporation's stock) _____, and
WHEREAS, the said defendants desire to have such order set aside and matters returned to their status quo, and the court upon reviewing the circumstances, and upon the filing of this bond, has made its order dissolving said injunction pending a hearing and determination in the premises.
NOW, THEREFORE, the condition of this obligation is such that, if the court finally decrees for the plaintiff in this action, and if the defendants will pay to said plaintiff all damages and costs the plaintiff my sustain through (for instance, the transfer of said corporation shares). . .
Analysis
Injunction. When an injunction is issued by the court at the request of one person, it generally requires that another person perform or refrain from performing some particular thing until the outcome of the court hearing. Under these circumstances, the plaintiff must post a bond guaranteeing to reimburse the defendant for any damage sustained by reason of this injunction in the event a permanent injunction is refused.
Dissolve injunction. In an injunction case, the defendant may sometimes have a temporary injunction dissolved provided he posts a guarantee that the plaintiff will be paid damages that the court may decide he has suffered should a permanent injunction be granted after the decision of the court.
Appeal Bonds
STAY OF PROCEEDINGS (Undertaking Form)
WHEREAS, by an order of the _____ Court of the State of _____, made on the _____ day of _____, 20__, it was ordered that pending the perfecting of an appeal by the plaintiff to the Court of Appeals from the judgment of the _____ appellate Division, and pending the hearing and determination of the said appeal, all proceedings by the Defendant, his attorneys and agents, for the enforcement of the said judgment, be stayed on the condition that the Plaintiff execute and file an undertaking with corporate surety in the sum of _____ Dollars ($_) conditioned for the payment of the difference between six per cent per annum and the amount of interest allowed by the depository, the _____ bank of _____, in the event that the said judgment shall be affirmed by the court of appeals.
NOW, THEREFORE, the Surety does hereby undertake that the Plaintiff will pay the Defendant the difference between six per cent per annum and the amount of interest allowed by the depository, the said _____ bank of _____, not exceeding, however, _____ Dollars ($_), if the judgment or order appealed from, or any part of it, is affirmed or the appeal is dismissed.
Analysis
Appeal; stay of execution. When a judgment or order denies the plaintiff the remedy he sought, he must post an appeal bond if he wishes to have a higher court hear his argument. The appeal bond guarantees that the plaintiff will pay court costs on appeal. If the court instead grants the defendant relief, the plaintiff must post a stay of execution bond. This bond stays execution of the lower court's decision pending outcome of the higher court hearing. It guarantees payment of judgment and other costs that may be awarded the defendant by the higher court. The bond in the above example reimburses the defendant for loss of obtainable interest over what the depository institution pays, while the funds are tied up pending the ruling of the upper court.
Appeal; losing party. When a losing party desires to appeal the case to a higher court, the appeal bond he posts guarantees payment of the entire judgment plus interest and court costs should a higher court rule against him.
Bail Bonds
UNDERTAKING FOR BAIL OR APPEARANCE—Criminal Cases
WHEREAS, AN ORDER, having been made on the _____ day of _____, A.D., 20__, by _____ of the County of _____, state of _____, that [name] be held for [preliminary hearing, or to answer for trial] upon which he has been admitted to bail in the sum of _____ Dollars ($_).
NOW, THEREFORE, We, _____ as surety, a [name of state] corporation having its principal office in the City of _____, State of _____, do hereby undertake that the said [name] will appear and answer the charge above mentioned in whatever Court it may be prosecuted, and will at all times hold himself amenable to the orders and process of the Court and, if convicted, will appear for judgment, and render himself in execution thereof, and will not depart the jurisdiction without leave first having been obtained, of if he fails to perform either of these conditions, that he will pay to the State of [name of state] the sum of _____ Dollars ($_).
THE FURTHER CONDITION of this obligation is such that if a warrant is issued upon a charge of felony against the person admitted to bail hereunder, then, in such event, the surety herein named will, upon notice hereof, surrender such person to the proper authority.
It being with the knowledge of the surety that the defendant herein has been convicted of a felony within two years last prior to his application for admission to bail herein, this undertaking is subject to the further condition that said defendant will not commit any felony during the period of release on this bond.
Analysis
Bail bonds are required to release persons involved in criminal actions. Generally, these bonds provide that the bonded person will appear in court at the time stipulated or the entire penalty of the bond will be forfeited. If the bonded person has committed a felony within the previous two years, the bond also guarantees that he or she will not commit another felony while under the bond.
Bail Bond Agents
BAIL BOND AGENTS FIDELITY BOND
KNOW ALL MEN BY THESE PRESENTS: That, [name] of [city and state], as Principal, and [name of surety company] as Surety, are held firmly bound unto the [state] Department of Insurance in favor of the People of this state, as Obligee in the sum of $_____ for the payment in lawful money of the United States of America of which sum the Principal and Surety bind themselves, their heirs, executors, and administrators, successors, and assigns jointly and severally by these presents.
WHEREAS, the Principal as Agent for _____, an insurance company legally licensed under the laws of the state of _____ has applied for a Bail bond Agent's License for the term beginning _____ and ending _____ and this bond is to cover the term of said license; and
WHEREAS, by Section _____ of the Bail Act of [year] each Agent engaged in giving bail for an insurer is required to be licensed and before receiving such license, file a Fidelity bond in the penalty of [dollar amount] for the faithful performance of said Agents duty.
NOW, THEREFORE, the condition of this obligation is such that should a License be granted to the said Principal, then such LICENSEE shall during the term of said License faithfully observe all applicable [state] Statutes now existing, the [state] Bail Act of [year], and shall faithfully perform all the duties required by such laws, then this obligation shall be null and void; otherwise to remain in full force and effect, subject to the following:
1) The Insurance Commissioner or his duly authorized representative of the [state] Department of Insurance in favor of the People of the state of [name of state] reserves the right to declare this bond in default and shall be authorized to levy against said surety and principal under this obligation for due and proper distribution to any party or parties suffering as the result of any violation by Principal of said [state] Statutes existing now or as hereafter amended;
2) The aggregate liability of the surety under this bond shall not exceed the penal sum aforementioned; and any payment made by the surety to the [state] Department of Insurance shall act to reduce the surety's liability hereunder by the amount of the payment;
3) This bond may be continued from term to term by Continuation Certificate signed and sealed by the Surety;
4) If the surety shall so elect, this bond may be cancelled by giving thirty days notice in writing to the Obligee.
IN WITNESS WHEREOF, the Principal has hereunto affixed his or her signature and the Surety has caused this instrument to be executed by its officer or attorney-in-fact proper for the purpose and its corporate seal to be affixed duly attested this _____ day of _____, 20__.
Analysis
Many states license bail agents through the department of insurance. Most require the licensee to post a bond.
Collateral Security
In many cases, sureties will issue various court bonds only on receipt of collateral security. They may require this security even though the bond applicant shows the ability to pay court costs, interest or damages if a court decision is rendered against him. The reason posting collateral is necessary is that by the time the argument between plaintiff and defendant is finally settled, the principal may find himself in a financial position where he is unable to pay for damages. This would put the surety in the position of having to pay because the bond it issues is a guarantee of the principal's promise to perform or pay according to the ruling of the court.
The various types of acceptable collateral include cash, certified checks, bank certificates of deposit, assigned savings accounts, assignments of cash values on life insurance and United States government bonds and treasury notes.
Bond Forms
Court bonds are very much like fiduciary bonds. In other words, the terms and conditions of court bonds are prescribed by statute, the bonds are non-cancelable and continue until matters between parties are officially settled or the statute of limitations has run.