The recent unpublished appellate decision in American Rag v. Haralambus
highlights that there can sometimes be disagreement over the surety’s liability
under an appeal bond.
During a non-jury trial, the court entered a judgment in favor of
Haralambus for royalty payments and damages for American Rag’s breach of their
agreement. American Rag appealed and filed an appeal bond in the amount
$419,775.63 equal to 1.5 times the judgment amount for damages per Code of
Civil Procedure 917.1. At the time, Haralambus did not oppose the bond amount.
The Court of Appeal affirmed Haralambus’ judgment triggering the
surety’s obligation under the bond. The surety company then received three
notices of levy from parties that had obtained judgments against Haralambus,
and because the levy amounts were greater than Haralambus’ $348,164.59 judgement
plus interest against American Rag, the surety informed Haralambus that they
were required to pay the $348,164.59 to the Los Angeles County Sheriff’s
Department. In doing so, the surety maintained that they satisfied their
obligation under the bond.
Haralambus disagreed and refused to execute a document releasing the
surety’s liability. Haralambus argued that the surety was required to make the
royalty payments in addition to the damages up to the bond amount. The surety
ultimately filed a motion to the court to exonerate the appeal bond, which the
trial court granted and was upheld on appeal.
While this case is unique in its particulars, it is not uncommon for
parties to disagree over what is owed under the appeal bond particularly as it
relates to costs and attorney’s fees incurred during the course of the appeal.
Since sureties are required to satisfy their obligation after 30 days from the
appeal being final, they will often pay the undisputed portion first while the
parties settle on the disputed portion either through stipulation or court
order.
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