Terms and Definitions

The Terms & Definitions provided herein are for informational purposes ONLY and is not intended to serve as legal advice and is no substitute for consulting legal counsel.

A bond which is furnished by the executor or administrator of an estate. It guarantees that the estate will be settled in accordance with the terms of the Will, or, if there is no Will, in accordance with the law. It guarantees the fidelity of the executor or administrator.

Admiralty refers to a body of law peculiar to United States Admiralty Courts which have jurisdiction over maritime causes or controversies arising out of acts done upon or relating to the sea. The initial complaint in admiralty is known as a libel, and the party filing same is called the libelant. The action can be against a person – “in personam”,or against the vessel itself – “in rem”. The libelant may institute a proceeding that is basically the same as an attachment proceeding and have the U.S. Marshall seize the vessel as security for the claim. When a vessel is seized, it is said to have been “libeled” by the libelant who may be required to post a bond with essentially the same guarantees as a standard attachment bond. The release of a libeled vessel can be accomplished by the filing of a counter bond by the vessel’s owner.

Guarantees repayment or liquidation by the principal of moneys advanced in connection with a construction or other types of contract. These bonds are underwritten as financial guarantees and only the very best applicants qualify for suretyship.

When a judgment or decree has been rendered in one court and the losing party wishes to take an appeal to a higher court, he or she ordinarily must give an appeal bond. The giving of this bond usually prevents the successful party in the lower court from executing on the judgment. Therefore, the appeal bond generally supersedes or takes the place of the judgment. The bond guarantees that the appeal will be prosecuted without unnecessary delay, and if the judgment is affirmed by the Appellate Court, that the principal will satisfy the judgment with interest and costs.

A bond appointing a person for the benefit of creditors by an insolvent debtor to liquidate the debtor’s assets and make distribution to creditors.

When an attachment has been issued, a defendant may discharge the attachment by giving the bond conditioned for the payment of any judgment that may be rendered against him/her in the action, with interest and costs.

Attachment is taking a defendant’s property into custody by a summary process from the court in advance of the trial on the merits of the case. It is taken as security for the payment of any judgment that may be recovered by the plaintiff in the action. Attachment is allowed only where the plaintiff alleges a statutory ground for it (e.g. defendant is a nonresident or is about to leave the jurisdiction or remove or conceal his/her property). The bond, which the plaintiff is required to furnish, provides for indemnity to the defendant against loss or damage in case it is finally decided that a statutory ground did not exist or the plaintiff fails to recover a judgment against the defendant.

These bonds are generally good faith and credit obligations guaranteeing the broker will not deceive or make any misrepresentations to the customer and faithfully account for any funds deposited with them by the customer. In some jurisdictions the bonds also guarantee payment of premium taxes and money due insurance companies. The bonds are for the most part regulatory/good faith and credit obligations and there is no rule of thumb regarding net worth. Broker bonds can be written for reputable and experienced applicants with reasonable income and a comfortable financial worth.

The Commercial Crime Policy can be purchased with a variety of coverages, all protecting the business from criminal acts. Examples include Employee Dishonesty, Forgery or Alteration, Theft, Disappearance and Destruction, Robbery and Safe Burglary, Premises Burglary, Computer Fraud, and Extortion.

These bonds may be employed by defendants to retain or regain possession of property that has been replevied. They guarantee that the property will be surrendered, to satisfy the final judgment of the court, in the same condition as when recovered. There is a real exposure under these bonds for safekeeping. The property, in essence, becomes the property of the defendant to deal with in any way it sees fit. Both the defendant and the surety would be liable for any deterioration or outright destruction of the property during the time of the court action.

These bonds are generally filed as counter bonds to release property seized by plaintiffs; or in some cases, to postpone enforcement of a court order pending further judicial proceedings such as appeals. The former includes release or discharge attachment or garnishment and counter replevin bonds, and the latter includes appeal, supersedeas and stay of execution bonds. In either case, defendant bonds guarantee the payment of any final judgment entered by the trial or appellate court in favor of the plaintiff and against the defendant.

A Bond posted by the disbursing agent appointed solely to marshal the assets, liquidate and distribute to creditors guaranteeing faithful execution.

The Employee Retirement Income Security Act of 1974 requires employers that have a pension or profit sharing plan to maintain a bond equal to ten percent of the amount of the plan’s asset. The bond insures that the trustees of the plan will properly manage the assets.

Bond posted by the one named in a Will to administer the estate of the testator guaranteeing faithful execution.

These bonds are purchased by employers (the insureds) to indemnify or protect against the dishonest acts of an employee. The employer is the equivalent of the obligee.

This type of bond guarantees the person appointed to a position of trust will faithfully perform all duties associated therewith and account for the property being handled on behalf of others. Fiduciary Bonds are instruments written on behalf of persons appointed by courts or designated in Wills or Deeds of Trust to take possession of an estate or property, manage and control it, and finally to account for, transfer or distribute it as required by law. Fiduciaries are agents of the courts and merely a conduit through which courts exercises its custody. Fiduciary Bonds are required by law, and in many instances the specific bond form is set forth by statute. While these bonds may differ in detail among various states, the basic guarantees are that principals will faithfully and properly perform their duties as required by law.

This type of bond is used by plaintiffs to obtain security for an alleged claim for debt by attaching property or credits of defendants that are in the hands of a third party. Third party garnishees, when properly notified, are obligated to hold the property pending the outcome of the suit. This action is frequently used to attach either bank accounts or accounts payable by a business concern.

See Long Term Probate Bond.

See Long Term Probate Bond.

This type of bond may be required of law officers who are called upon to execute o writs. Generally, the officers will rely on the plaintiff’s attorney as to what property is subject to seizure. The officers are liable for damages for seizing the wrong property or acting on invalid writs. The bond is for the protection of officers of the court from such damages. If there is a fully adjudged claim that has been reduced to a judgment, the potential liability under such a bond is quite limited. However, if the claim is questionable or the property not clearly identified as to ownership, substantial damages can occur. Sometimes adjoining or other property not belonging to the plaintiff is damaged when the plaintiff’s property is removed. For example, damages may occur on the premises where the plaintiff’s property is located.

A bond required or used in judicial proceedings such as attachment, appeal, or probate. Sometimes called a litigation bond.

Long Term Probate Bonds may continue in force for an extended period of time. For our purposes, these are the bonds that extend beyond two or three years in duration. The principals have many of the same duties as short-term fiduciaries, plus the added responsibility of maintaining, safeguarding, and investing the estate assets for a longer period of time. Generally, the longer the term of the risk, the more hazardous it becomes. Some cases remain open for many, many years. For example, in the case of a guardianship of a minor, the bond remains in force until the ward reaches the age of majority. These bonds may also run for the indefinite lifetime of an incompetent person.

A lien against real estate may be filed for the amount claimed to be due for labor or materials furnished for the construction of a building or other improvement upon real property. While the owner’s liability is being determined, the owner may discharge the lien by giving a bond which guarantees the payment of any amount that may be found to be due to the claimant together with interest and costs. It is often to the owner’s advantage to give the bond to clear the “title” to the real estate. Depending upon the circumstances of the case the owner may ultimately have to pay the claim and seek recourse against a contractor who may be in serious financial difficulty and unable to respond.

Where a judgment has been entered by default, the defendant may, under certain circumstances, have the case reopened and tried on its merits, upon giving a bond conditioned for the payment of any judgment that may be rendered in the action.

These bonds are generally given in connection with the prejudgment seizure of property belonging to or in the hands of the defendant. Since this action involves the prejudgment seizure of property, the plaintiff must adhere to the letter of the law so the defendant is not deprived of property without due process of law. The bonds guarantee return of the seized property and/or payment of any damages sustained by the defendant if the court ultimately determines the seizure was wrongful and decides in favor of the defendant. Examples include attachment, garnishment, replevin and claim and delivery bonds.

Person appointed as fiduciary prior to a will being admitted to probate or administration of an estate, with no power to make distribution of estate assets pursuant to the will until such time as the will has been admitted to probate.

A QDOT is a trust created upon the death of an individual and qualifying for the federal estate tax marital deduction where the decedent-s surviving spouse is not a United States citizen. A qualified domestic trust is the only form of transfer that will qualify for the marital deduction for a decedent who leaves an alien spouse. In addition to satisfying the normal marital deduction rules, the trust instrument must require that at least one trustee be an individual who is a citizen of the United States or a domestic corporation, and that no trust distributions may be made without the consent of that trustee. An appropriate election on the estate tax return is also required. Thus a bond is placed guaranteeing faithful execution.

A bond appointing a person to take temporary or permanent charge of the property of debtors or to operate, reorganize and rehabilitate the debtors business for its continuance as a going concern guaranteeing faithful execution.

This term is applicable to any bond conditioned for future return, if ordered, of money which the principal was allowed to charge and retain pending final determination or decision in a contested matter.

Where a case originally brought in a state court is removed to the federal court, the defendant is required to give bond for the payment of costs in federal court if the case is found to have been improperly removed. Similar bonds may be required on removal of a case from one state court to another.

A replevin bond is given by a plaintiff who is claiming either ownership of property in the hands of the defendant, or at least a legal right to possession. In a replevin action, the plaintiffs claim title or ownership of the property, and that they are entitled to immediate possession. This differs from an attachment or garnishment proceeding where the property being seized belongs to the defendant. Replevin bonds, also known as claim & delivery, detinue or forthcoming bonds in some jurisdictions, must be filed by the plaintiff to secure possession of the property in question and it guarantees return of the property and/or its value plus damages if the replevin is deemed wrongful. This differs from attachment or garnishment bond proceedings where property is held in the custody of the sheriff or marshal or retained by the garnishee.

A statutory requirement of certain plaintiffs in a derivative suit to post a surety bond from which defendants may be reimbursed for their expenses if they prevail.

A drastic but legal preliminary remedy for certain kinds of infringement. A Federal court may order the United States

Marshal to confiscate and impound allegedly infringing articles pending trial. Since it may turn out later that the allegation was incorrect, the party seeking seizure must post a bond to protect the party whose items were seized. The remedy may even be granted ex parte in certain circumstances (meaning that the defendant has no chance to oppose the seizure in advance).

Short Term Bonds are issued in connection with estates where all duties can be performed, and the matter closed within one, two, or in some cases 3, years. The primary duties of short-term fiduciaries include collection of assets, payment of proper claims against the estate, and distribution of the remainder to the estate beneficiaries. The most common types of short-term bonds are those written on behalf administrators and executors, or as they are sometime called, personal representatives.

Bonds of these types are identical to appeal bonds.

This is a form of bond given by a defendant to prevent an officer of the law from executing on a judgment pending an appeal to a higher court. It has been mentioned previously under appeal bonds, but it “supersedes” or stands in place of the judgment.

A three party instrument by which one party (the surety) guarantees that a second party (the principal) will perform an obligation or duty owed to a third party (the obligee). The bond is generally in a fixed amount or penal sum, a.k.a. penalty, which establishes the monetary limit of liability for the surety.

It is a judge’s short-term order forbidding certain actions until a full hearing can be conducted. Often referred to as TRO. A TRO bond carries essentially the same guarantees and liabilities as a preliminary injunction bond. In some jurisdictions, a TRO bond is replaced by a subsequent preliminary injunction bond.

A bond posted by the trustee of an estate guaranteeing faithful execution.

If Chapter 11 is granted, an automatic stay goes into effect preventing creditors from enforcing claims pending reorganization. A Creditors Committee consisting of the major creditors is created to approve, modify or disapprove the plan. Often the bankrupt is a fairly large corporation with operations that are quite complex. The company may have many outstanding issues of stock and bonds as well as numerous classes of creditors. This would of course require a fiduciary be appointed with ample experience and ability. By the very nature and complexity of this type of activity, a bond of this type can be expected to continue in force for many years.

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The Terms & Definitions provided herein are for informational purposes ONLY and is not intended to serve as legal advice and is no substitute for consulting legal counsel.

Court and Commercial Surety