Appellant’s Automatic Supersedeas Obtained by Posting Security Affects Judgment Winner’s Lien Priority

By: Kevin McKeon

The effect of a judgment requiring the payment of money in favor of a verdict winner is to “create a lien on real property located in the county, title to which at the time of entry is recorded in the name of the person against whom judgment is entered.”  Pa. R.C.P. 3023 (a).  If the verdict loser appeals the judgment, an automatic supersedeas (that is, a stay) of the duty to pay the judgment can be obtained; the verdict loser can simply file with the trial court clerk “appropriate” security (cash, T Bills, CDs, a letter of credit, or an appeal bond) in the amount of 120% of the judgment.  Pa. R.A.P. 1732, 1734.

What happens to the verdict winner’s (who is now the appellee) lien on the verdict loser’s real property once the automatic stay goes into effect?  Does the lien disappear?  And if so, what effect if any does its disappearance have on the verdict winner’s lien priority?  The Superior Court answered these questions for the first time in 2017 in Leoni v. Leoni, 153 A.3d 1073, 1083 (Pa. Super. 2017).  The answer, while logical, may surprise verdict winners who thought that even after security for the judgment was posted and an automatic stay of execution on the judgment went into effect pending appeal, they continued to hold a lien and therefore maintained their priority as against other existing and future lien holders.  The answer is that with the posting of appropriate security and the consequent stay of execution pending appeal, the judgment lien also is discharged, so that the verdict winner’s lien loses priority.  As the Superior Court reasoned,

we find the only logical and equitable conclusion to be that Appellee’s judgment liens were, in fact, discharged by the filing of the supersedeas [bond], which resulted here in the loss of priority in Appellee’s judgment liens. The supersedeas [bond] was deemed by the trial court to be “appropriate security,” and the purpose of requiring 120% bond is to account for interest and costs incurred during the appeal to protect the appellee’s interests. Moreover, “a court may enter judgment in the amount of an appeal bond if appellant is not successful on appeal.” Burrell Const. & Supply v. Straub, 440 Pa.Super. 596, 656 A.2d 529, 533 (1995).

153 A.3d at 1083.

As the court further explained, there is no need for the lien to remain in place, because the supersedeas security serves the same purpose (see 153 A.3d at 1084 “the supersedeas [bond] acted as security for the amount of Appellee’s judgments, plus appropriate costs and interest. It would be illogical to conclude that Appellee maintained his liens against Appellants’ real property during the pending appeal, as this would unnecessarily further encumber Appellants’ assets and would result in Appellee being doubly protected.”).  Moreover, the court reasoned, the appellee has an additional remedy if the discharge of the lien unduly exposes the verdict to a risk of undercollection – relief is available on application under Pa. R.A.P. 1737 to increase security.

Under existing practice, much of what happens once a judgment verdict is appealed unfolds under private arrangements between counsel for the plaintiff and defendant. The Superior Court’s ruling in Leoni clarifies the rules that apply absent such private arrangements, and so alters the calculus by strengthening the position of the verdict-losing appellant (by creating additional potential nonpayment risk for the verdict winner).

For further discussion on this topic, see G. Ronald Darlington, Kevin J. McKeon, Daniel R. Schuckers & Kristen W. Brown, Pennsylvania Appellate Practice (2016-2017 Ed.) § 1735:3.

About the Author:

Kevin McKeon, partner at Hawke, McKeon & Sniscak, LLP, represents a diverse array of clients before Pennsylvania state agencies, and state and federal appellate courts. A co-author of West’s Pennsylvania Appellate Practice and immediate past chair of the Pennsylvania Appellate Court Procedural Rules Committee, Kevin uses his comprehensive knowledge of Pennsylvania appellate procedural rules to guide clients through complex appellate proceedings.