Replevin vs. Counter Replevin Bonds

posted in: Blog, Court Bonds | 0

Court bonds are split into two categories. Fiduciary and Judicial. In this blog, we are going to focus on the two types of judicial bonds: Replevin bonds and Counter Replevin bonds.

But first, let’s tackle what a replevin is.

Understanding replevin

Replevin is a law that allows people to recover goods and property that they believe is rightfully theirs. These goods and properties are actually being withheld from them. People sue to recover these items through a court of law. It is regarded as an equitable remedy; it involves a court ordering a person(s) to return the goods instead of ordering compensation from them.

Replevin can be applied in a wide range of situations; these include but are not limited to situations in which a person’s property was temporarily held and should have been given back to them, but the item was still not released. This may also occur when two parties both have rights to possession, where one has more rights than another, but the other party will not return ownership.

For example, replevin actions are typically used by creditors. Creditors reclaim a property (usually a vehicle) that is unlawfully held by a debtor. However, should the debtor pay the fees and arrears due, this makes the vehicle eligible for release. If the creditor does not release it, the person may take replevin action.

Here’s another example. A landlord locks a tenant out from a rental property and holds his or her belongings in payment for rental arrears. In this case, the tenant could directly sue the landlord to surrender the illegally-held items. Technically, the person whose property is being withheld could sue for financial damages. In this instance, using replevin can serve a person if he or she wants to get back the items instead of just being compensated for the items.

What does a replevin bond have to do with this?

A replevin bond, also known as a claim and delivery bond, requires plaintiffs who want to secure physical possession of disputed assets. It is required by courts before authorizing repossession of these assets.

Who does a replevin bond protects?

The bond protects the obligee – in this case, it is the court or beneficiary (defendant). The principal is the plaintiff.

A replevin bond protects the obligee whose assets are being repossessed in the event of unlawful repossession. As covered by the bond, damages may be awarded.

Before the start of a court trial, a plaintiff can post a replevin bond to demand the return of goods or property held by the defendant. This bond lets the defendant take legal custody of goods or property even before the court starts the trial.

Replevin bonds assure that if the court rules in favor of the defendant, the plaintiff will release the goods or property, and may pay the defendant full monetary damages worth of the property. The plaintiff must also recompense the defendant for any damages sustained as a result of the lawsuit and if the plaintiff has disposed of the property.

When will you need a replevin bond?

The courts typically require a replevin bond in lawsuits that entail sales contracts, including the sale of goods, which falls under installment plans.

These types of contracts usually indicate that the seller (or creditor, see above example) retains legal rights to the property until the buyer completes payment. The seller claims title to the property (which is mortgaged as collateral) through an established security interest (aka perfected lien) when it files a finance statement summarizing the sales contract with the appropriate statutory authority (ex. government agency). That security interest serves as a legal notice that the seller has the title and rights to the property and claims superior interest over the buyer’s other creditors.

Sureties look into an applicant’s security interest in the goods or property. The buyer’s interest or title is the equitable remedy until the buyer compensates for the goods.

As a general rule of thumb, replevin bonds are deemed by most sureties to be low-risk bonds. They are considered low-risk because in most jurisdictions the courts require the plaintiff to prove a judicious right to ownership of any assets before they are repossessed, apart from just posting a bond.

But wait! Courts not only require plaintiffs to issue a replevin bond. Defendants in these types of cases need one to counter replevin. And it is called a counter replevin bond.

Why do defendants require a counter replevin bond?

Counter replevin bonds are the defendants’ counterclaim to plaintiffs’ replevin bond.

A counter replevin bond is required by the courts if a party whose assets are being repossessed decides to file a motion to stop the repossession pending a court trial in determining the current owner of the disputed assets.

In a counter replevin bond, the obligee is the court that requires the bond to benefit the plaintiff. The principal is the defendant seeking a counter replevin action to recover possession of goods or property. The defendant promises to return the property should the plaintiff prevail in the case.

What instances do you need to have a counter replevin bond for?

Basically, courts may require counter replevin bonds in most civil cases involving possession of goods, property, or any valuable assets. Yet, the coverage amount for this bond is typically arranged to one and a half times the value of the goods or property being considered.

Should the defendant fails to post a counter replevin bond, the court will mandate the release of the items to the plaintiff after posting a replevin bond.

Counter replevin bonds offer benefits to both the plaintiff and the defendant. These bonds safeguard the plaintiff during the time of the litigation of the case. It also benefits the defendant because it permits them to gain control of the property or asset. However, while the defendant may be allowed to hold possession of the property, he or she will be held accountable by the court to cover damages and costs should the plaintiff win the case. The defendant is bound to release the property to the plaintiff in the same condition as when it was recovered.

The surety company, which underwrites counter replevin bonds, is equally liable for any damage, decline, or destruction of the recovered property during litigation.

Does a counter replevin bond require collateral?

Yes. Surety companies often require collateral for counter replevin bonds.

Sureties understand the unpredictability of these bonds as they face higher risks and financial damages. Counter replevin bonds enable the defendants to retain control of the goods or property in question and can deal with it whichever they deem fit. It is a fact that the defendant may dispose of the property and can even cause damage or destruction to it that could potentially lose its value.

This is why sureties require collateral when issuing counter replevin bonds. Collateral reduces the risk of a bond loss since surety companies are held secondarily liable in case the defendant mismanages the goods or property during litigation. However, counter replevin bonds can be obtained without collateral but this would involve higher premiums. All collaterals are received by sureties before a bond is released.

Want to know more about replevin and counter replevin bonds? Call Surety Bond Authority Inc. at 800-333-7800 to request a free quote.

Check out this Infographic!

Have a better view of Replevin Bonds and Counter Replevin Bonds through this infographic.

Replevin and Counter Replevin Bond Infographic
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