Deposits in Lieu of Bonds in California

Code of Civil Procedure Part 2, Title 14, Chapter 2, Article 7 deals with deposit in lieu of bonds in civil actions regarding bonds and undertakings in California.

Section 995.710 provides that the principal may, without prior court approval, instead of giving a bond, deposit with the officer any of six specified financial instruments. The deposiis in an amount or have a face value, or have a market value, equal to or in excess of the amount that would be required to be secured by the bond if the bond were given by an admitted surety insurer.

The deposit must be accompanied by an agreement executed by the principal authorizing the officer to collect, sell, or otherwise apply the deposit to enforce the liability of the principal on the deposit.

Section 995.720 requires the market value of bonds or notes, including bearer bonds and bearer notes, to be agreed upon by stipulation of the principal and beneficiary or the market value must be determined by court order in the manner prescribed in this section.

Section 995.730 provides that a deposit given instead of a bond has the same force and effect, is treated the same, and is subject to the same conditions, liability, and statutory provisions, including provisions for increase and decrease of amount, as the bond.

Section 995.740 requires the officer to do two specified actions if no proceedings are pending to enforce the liability of the principal on the deposit.

Section 995.750 requires the principal to pay the amount of the liability on the deposit within 30 days after the date on which the judgment of liability becomes final.

Section 995.760 specifies that, if the principal does not pay the amount of the liability on the deposit within the time prescribed, then the deposit is collected, sold, or otherwise applied to the liability upon order of the court that entered the judgment of liability, made upon five days’ notice to the parties.

Bonds or notes, including bearer bonds and bearer notes, without a prevailing market price are required to be sold at public auction. Notice of sale is served on the principal. Bonds or notes having a prevailing market price may be sold at private sale at a price not lower than the prevailing market price. The deposit is distributed in the 3-part specified order.

Section 995.770 requires a deposit given pursuant to this article to be returned to the principal at the earliest of the specified three times.