UNDERTAKINGS: Securing Respondent's right to collect costs and the underlying judgment
—Drawn from a continuing education presentation conducted by Judith Giers
I. Purpose of the Undertaking Requirement
II. Securing Costs that might be Awarded on Appeal
III. Securing Judgments and Staying Execution
- Staying Money Judgments
- 1. Posting the Amount of the Judgment
- 2. Supersedeas Bonds
- 3. Letters of Credit
- 4. Agreements for Other Types of Security
- Obtaining Stay of Non-money Judgments
IV. Appellate Review of Trial Court Decisions on Undertakings/Stays
NOTE: This document originally contained references to sample documents, which we made available to attorneys who attended the program. We cannot provide those documents to non-lawyers who visit this website.
I. Purpose of the Undertaking Requirement
The filing of a notice of appeal does not automatically stay enforcement of the trial court judgment(s). ORS 19.330 (filing of notice of appeal does not automatically stay judgment.) The purpose of the requirement that appellants post an undertaking, or bond, is to secure the prevailing party's judgment and appellate costs and stay execution of the judgment pending appeal. As you explain the undertaking requirements to your client, it helps to gently remind them that they lost at the trial court level and now the other side has a judgment against them.
That judgment is enforceable and may be executed until it is reversed on appeal or stayed pending appeal. See ORS 18.252 (judgment is enforceable upon entry) and ORS 19.300 -360 regarding undertakings and stays pending appeal.
In order to stay enforcement of the trial court judgment the appellant must post adequate security, see ORS 19.335 (supersedeas undertaking acts to stay judgment pending appeal), obtain a discretionary stay of enforcement from the trial court or the Court of Appeals, see ORS 19.350 and. 360, or reach an agreement with respondent staying execution, see ORS 19.310 (written stipulation to waive or limit undertaking).
There is no rule against creativity here. If you can devise a method for securing the judgment that satisfies the other side, the parties can so stipulate. ORS 19.310. Creativity in this area can save your client a great deal of money—try thinking outside the box.
II. Securing Costs that might be Awarded on Appeal
Undertaking for Costs: $500, 14 days.
All appellants must post a minimum $500 undertaking for costs. ORS 19.300(1). This bond secures the respondent's costs on appeal. Generally speaking, the respondent's costs on appeal are quite low (appearance fee, prevailing party fee, and cost of making required number of copies of the brief, etc.) The cost bond must be filed with the trial court administrator within 14 days of filing the notice of appeal and must be served on the opposing party in the manner described in ORCP 9B. Objections the undertaking for costs must be filed within 14 days. ORS 19.305(3) (this 14 day deadline is notwithstanding the 10 day deadline in ORCP 82 F).
In deciding whether to require an alternative amount for the cost bond, the trial court may not include interest that will accrue on the underlying judgment, as that is only appropriate for bonds intended to stay execution of the judgment. Computer Concepts Profit Sharing Plan v. Brandt, 123 Or App 42, 46-47 (1993). The trial court may, however, include the 10% penalty that could be awarded for an appeal taken without probably cause under ORS 19.445. Fleming Companies, Inc., v. Hamilton, 149 Or App 760, 764-64 (1997).
The Court of Appeals may dismiss an appeal for failure to file a cost bond. See ORAP 7.40. The respondent must give the appellant 7 days notice, written or oral, before filing a motion to dismiss the appeal for failure to file a cost bond, ORAP 7.40, and should state in the motion how respondent has been prejudiced by appellant's failure to timely file a cost bond. Responding to such a motion by filing a cost bond is not, in itself, sufficient, and appellant should explain why it failed to file a timely cost bond. Id. Generally speaking, the Court of Appeals will not dismiss an appeal for failure to timely file a cost bond unless prejudice to respondent is shown.
Two Common Methods
Post the Money. There are two common methods for posting a cost bond. The easiest method is to have your client write a $500 check on a National Bank and deposit that check with the trial court administrator. See ORS 22.020. A document entitled Cost Bond on Appeal (or something similar) should be filed in connection with depositing that check. The form should have a line for the trial court to sign in approving the cost bond.
Surety. The other commonly used method is to have someone who is not liable on the judgment act as surety. See ORCP 82 D(1) for requirements for individual sureties. The surety must swear that he or she has assets of at least twice the amount of the bond (usually $1,000) and that he or she will pay any damages, cost and disbursements awarded against the appellant on appeal. The liability of the surety is limited to the amount specified in the undertaking. ORS 19.305.
III. Securing Judgments and Obtaining a Stay of Execution
As explained above, the trial court judgment is not automatically stayed by the filing of a notice of appeal. ORS 19.330. You may ask the trial court to stay execution of the judgment pending filing of your notice of appeal. See ORCP 72 A. However, once the notice of appeal is filed, the trial court may not stay execution pending the filing of a supersedeas bond unless such a stay is authorized by statute. Discretionary stays pending resolution of an appeal are limited to judgments not governed by ORS 19.335 or 19.340. See ORS 19.350(1).
The procedure for obtaining a stay of execution depends on what kind of judgment you have. For judgments covered by ORS 19.335 and 19.340 you must comply with the procedures set forth in those statutes. For judgments that do not fall into those statutes, you may seek a discretionary stay from the trial court under ORS 19.350, or, in limited circumstances, directly from the Court of Appeals, see ORS 19.350(5). ORS 19.340 allows the trial court, in its discretion, to waive or reduce the amount of a supersedeas undertaking if the appellant is an executor, administrator, trustee or other person acting on behalf of another. Under the same statute, if a judgment requires the sale of perishable property, the trial court may order the perishable property sold and the proceeds deposited or invested pending resolution of the appeal.
ORS 19.335 (2005) governs stays for five types of judgments. It provides:
19.335: Stay by filing of supersedeas undertaking. (1) If a judgment is for the recovery of money, a supersedeas undertaking acts to stay the judgment if the undertaking provides that the appellant will pay the judgment to the extent that the judgment is affirmed on appeal.
(2) If a judgment requires the transfer or delivery of possession of real property, a supersedeas undertaking acts to stay the judgment if the undertaking provides that the appellant will not commit waste or allow waste to be committed on the real property while the appellant possesses the property, and the appellant will pay the value of the use and occupation of the property for the period of possession if the judgment is affirmed. The value of the use and occupation during the period of possession must be stated in the undertaking.
(3)(a) If a judgment requires the transfer or delivery of possession of personal property, a supersedeas undertaking acts to stay the judgment if the undertaking provides that the appellant will obey the judgment of the appellate court, and that if the appellant does not obey the judgment, the appellant will pay an amount determined by the trial court and stated in the undertaking.
(b) If a judgment requires the transfer or delivery of possession of personal property, the judgment is stayed without the filing of a supersedeas undertaking if the appellant transfers or delivers the personal property to the court or places the property in the custody of an officer or receiver appointed by the trial court.
(4) If a judgment requires the foreclosure of a mortgage, lien or other encumbrance, and also requires payment of the debt secured by the mortgage, lien or other encumbrance, a supersedeas undertaking acts to stay that portion of the judgment that requires payment of the debt if the undertaking provides that the appellant will pay any portion of the judgment remaining unsatisfied after the sale of the property subject to the mortgage, lien or other encumbrance. The amount of the undertaking must be stated in the undertaking. The requirements of this subsection are in addition to any provisions in a supersedeas undertaking that may be required under subsection (2) or (3) of this section to stay delivery or transfer of property.
(5) If a judgment requires the execution of a conveyance or other instrument, the judgment is stayed without the filing of a supersedeas undertaking if the appellant executes the instrument and deposits the instrument with the trial court administrator. Unless otherwise directed by the appellate court, the instrument must be held by the trial court administrator until issuance of the appellate judgment terminating the appeal. Generally, if there is a money component of the judgment, the appellant must obtain a supersedeas bond or provide some other form of security for that part of the judgment. There are a number of ways an appellant can obtain such security.
A. Security for Money Judgments
1. Depositing the Amount of the Judgment
If the amount of the money judgment is low, or the appellant has substantial liquid assets, depositing the amount of the judgment with the trial court administrator under ORS 22.020 and 22.030(2) is often the easiest means of obtaining a stay. Be aware that interest that accrues on the deposited amount is not credited to the appellant, but instead goes into the general fund or some other fund designated by the relevant authority. ORS 22.060.
You may deposit things other than cash. ORS 22.020 allows deposits of money, an irrevocable letter of credit issued by an insured institution, as defined in ORS 706.008, a certified check or checks on any state or national bank within this country payable to the officer with whom such check is filed, satisfactory municipal bonds negotiable by delivery, or obligations of the United States Government negotiable by delivery, equal in amount to the amount of the bond or security deposit so required or permitted.
2. Supersedeas Bonds
Back in the old days (prior to 1991), one went to a surety company (an insurance company) and obtained a supersedeas bond that would cover the amount of the judgment, plus interest for a reasonable appeal period, in order to obtain a stay of a money judgment. However, supersedeas bonds are less common these days.
In order to obtain a supersedeas bond you contact a surety company and tell them you need a supersedeas bond, then you promise them all your clients assets, plus first born son, and maybe they will think about it—if you are a Fortune 500 company. This is almost true. In my experience, the folks who work for these surety companies are very nice, helpful, customer-oriented people. They are, however, hampered by very strict underwriting criteria, such that is nearly impossible to get a supersedeas bond for any client who is not a publicly traded company with excellent financials.
Because underwriters usually want to examine your client's financial reports, the process of obtaining a traditional supersedeas bond can be very lengthy. These stringent requirements and the expense and delay involved in getting a traditional supersedeas bond have led to an increase in the use of Letters of Credit for bonding purposes.
3. Letters of Credit
ORS 19.315 to .325 set out the requirements for using an Irrevocable Letter of Credit (ILOC) to provide security for a money judgment and obtain a stay pending appeal. Your client goes to its bank to obtain a letter of credit. The bank will have certain documentation requirements and will require collateral and may charge a substantial fee, depending on the bank's relationship with your client. These take time to get, so get started on this as soon as it looks like you will be appealing. Have your client make the initial contact with its bank, but get permission to deal directly with the bank yourself. You will probably need it. Most banks have a form that they use for an Irrevocable Letter of Credit. The form will probably NOT comply with ORS 19.315-.325. I have had good luck making changes to the bank's standard form. Once the bank understands that there are special requirements for this type of letter of credit, they are usually willing to allow modifications to their forms.
The cost of an ILOC depends greatly on your client's financial position and relationship with the bank. I recently handled an appeal where the ILOC cost to the appellant was $40,000 for a $500,000 ILOC in place for 2 years.
NOTE: MALPRACTICE TRAP
If you are the respondent, be aware that the premiums paid by the appellant for a supersedeas bond or the costs of an ILOC are recoverable as "costs" on appeal. ORS 20.310(2). Be sure you advise your client of that. Where a reversal is possible (where are they not?), think about whether there is some way to secure your judgment without requiring appellant to go to the expense of a supersedeas bond or ILOC.
4. Agreements for Other Types of Security
Creativity about securing the appeal can save your client (appellant or respondent) a good deal of money. If you can work out an agreed upon security arrangement, the court can approve a stipulated waiver, reduction or limitation of the undertaking. ORS 19.310. This is yet one more reason to ensure that the relationship between counsel remain cordial and professional—it is very difficult to negotiate an alternative security arrangement with opposing counsel who despises you. As an example: In a breach of contract case involving the sale of undeveloped real property, we were able to secure a roughly $500,000 judgment (general and attorney fees) against us by depositing a deed transferring the parcel of property at issue (worth at least $800,000) to respondents with the trial court administrator. The parties agreed that if the appeal is successful the deed will be returned to appellants. If the appeal is unsuccessful, appellants have 90 days from issuance of the appellate judgment to satisfy the judgment and get the deed back. If appellants fail to satisfy the judgment in 90 days, the deed is delivered to respondents who may then record it, in full satisfaction of the judgment.
B. Obtaining a Stay of Non-Money Judgments
What about judgments that are not money judgments? ORS 19.350 provides for discretionary stays by the trial court, but only for judgments that are not covered by ORS 19.335 or 19.340. To seek a stay under ORS 19.350, you must file a motion in the trial court for a stay pending appeal. The trial court has authority to decide such a motion even after a notice of appeal is filed. ORS 19.350(2). The trial court, in addition to whatever it thinks is appropriate, is directed to consider the following:
(a) The likelihood of the appellant prevailing on appeal.
(b) Whether the appeal is taken in good faith and not for the purpose of delay.
(c) Whether there is any support in fact or in law for the appeal.
(d) The nature of the harm to the appellant, to other parties, to other persons and to the public that will likely result from the grant or denial of a stay.
The trial court has discretion to impose reasonable conditions on the grant of a stay, including that appellant post a supersedeas undertaking in a specified amount.
An appellant can go directly to the Court of Appeals under ORS 19.350(5), bypassing the trial court, but only if the appellant can demonstrate that the trial court is unable or unwilling to decide the motion in a reasonable time, or that it would be futile to ask the trial court for a stay. Note: It is not always futile to ask the trial court (which ruled against you, after all) for a stay. You will need more than just a simple loss at trial to show that it would be futile to ask the trial court for a stay.
IV. Appellate Review of Trial Court Decisions on Undertakings/Stays
ORS 19.360 provides for appellate review of trial court decisions related to undertakings and stays. You seek review by filing a motion with the appellate court within 14 days of the trial court's order. The trial court's order is automatically stayed for 14 days, unless the trial court orders otherwise. The appellate court has de novo review. See ORS 19.360.
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