Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_15-cv-01989/USCOURTS-caed-2_15-cv-01989-1/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:1334 Bankruptcy Appeal

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

In re WILLIAM MATTHEW DUGO,

Debtor.

CIV. NO. 2:15-01989 WBS

BANKR. NO. 14-22435-A-7

MEMORANDUM AND ORDER RE: MOTION 

FOR STAY PENDING APPEAL

BANK OF STOCKTON,

Plaintiff,

v.

WILLIAM MATTHEW DUGO,

Defendant.

----oo0oo----

Plaintiff Bank of Stockton, a secured creditor, brought 

an adversary action against defendant and debtor William Matthew 

Dugo, seeking a determination that the obligation defendant owes 

plaintiff is not dischargeable. Plaintiff now seeks a stay 

pending appeal pursuant to Federal Rules of Bankruptcy Procedure 

Case 2:15-cv-01989-WBS Document 12 Filed 02/09/16 Page 1 of 7
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7062, 8007(b) and Federal Rule of Civil Procedure 62. (Docket 

No. 5.) 

I. Factual and Procedural Background

In 2007, plaintiff made loans to defendant to be used 

in defendant’s livestock operation, including a line of credit. 

(Compl. ¶¶ 12, 16 (Bankr. Docket No. 12).) Defendant pledged his 

livestock to plaintiff as security. (Id. ¶ 14.) The loan 

matured and defendant failed to repay all amounts due. (Id.

¶ 45.) Defendant filed a voluntary petition for Chapter 7 

bankruptcy on March 11, 2014. (Bankr. Docket No. 1.) 

Plaintiff brought an adversary action against defendant 

alleging willful and malicious injury by the debtor, 11 U.S.C. 

§ 523(a)(6); extension, renewal, or refinancing of credit 

obtained by use of a false statement in writing, 11 U.S.C. 

§ 523(a)(2)(B); and that the obligation defendant owed plaintiff 

was not dischargeable. (Compl. ¶¶ 9, 105-19, 120-27.) The 

bankruptcy court ruled in favor of defendant and plaintiff filed 

a notice of appeal. (Docket No. 1.) 

Defendant then filed a motion with the bankruptcy court 

for attorney’s fees of $19,340, and plaintiff moved for a stay of 

the adversary proceeding pending appeal. (Nally Decl. Ex. A, Tr.

of Nov. 10, 2015 Bankruptcy Ct. Proceedings before Judge David E. 

Russell (“Bankr. Ct. Tr.”) at 3:16-17, 10:22 (Docket No. 5-3).) 

Judge Russell denied plaintiff’s motion for a stay and awarded 

defendant’s attorney, Douglas Jacob, $15,000 as “partial 

reimbursement for the total [attorney’s] fees incurred.” (Id. at 

11:7, 11:23, 12:5-6.) According to defendant’s attorney’s 

testimony at the February 8, 2016 hearing, this money was to be 

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put into a trust payable to him. Judge Russell explained that he 

was not making a “final order” because “[a]t the conclusion of 

the litigation in this matter the Court will make a final 

determination upon motion of the parties for the final resolution 

of attorney’s fees.” (Id. at 11:10, 12:24-25, 13:1.) Thus, if

defendant prevails on appeal, it seems to be the understanding 

that defendant will have a right to the full amount of fees later 

to be determined by the bankruptcy judge and, likewise, if 

plaintiff prevails, it can recoup the costs from defendant’s 

attorney. (Id. at 11:11-14, 12:14-19.) 

Plaintiff now seeks a stay pending appeal of further 

adversary proceedings in bankruptcy court and the bankruptcy 

court’s order granting defendant attorney’s fees pursuant to 

Federal Rule of Civil Procedure 62(d). (Def.’s Notice at 2 

(Docket No. 5).) Plaintiff also requests the court waive the 

requirement of a supersedeas bond. (Id.) Defendant opposes the 

motion. (Def.’s Opp’n (Docket No. 6).) 

II. Discussion

Parties may obtain a stay of monetary judgments as a 

matter of right by filing a supersedeas bond. Fed. R. Civ. P. 

62(d); In re Swift Aire Lines, Inc., 21 B.R. 12, 14 (9th Cir. 

1982) (finding that Bankruptcy Rule 805 “does not exclude stays 

as a matter of right in bankruptcy”); see also Bolt v. Merrimack 

Pharms., Inc., Civ. No. 04-0893 WBS DAD, 2005 WL 2298423, at *2 

(E.D. Cal. Sept. 20, 2005) (explaining the Federal Rules of Civil 

Procedure impose distinct standards for stays of monetary 

judgments and stays of judgments involving injunctions). 

Therefore, if a bond is filed, the function of the court is

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“limited to passing on the sufficiency of the supersedeas bond 

and the adequacy of the sureties.” In re Swift Aire Lines, 21 

B.R. at 14. “The posting of a bond protects the prevailing 

[party] from the risk of a later uncollectible judgment and 

compensates him for delay in the entry of the final judgment.” 

Nat’l Labor Relations Bd. v. Westphal, 859 F.2d 818, 819 (9th 

Cir. 1988). 

The district court may also, in its “sound discretion,”

grant a stay without a bond in “unusual circumstances.” Fed. R.

App. P. 8(a)-(b); Fed. Prescription Serv., Inc. v. Am. Pharm. 

Ass’n, 636 F.2d 755, 760-61 (D.C. Cir. 1980) (finding the 

district court did not abuse its discretion in granting an 

unsecured stay where the net worth of the judgment debtor was 

forty-seven times the amount of the damage award). The burden is 

on the appellant to demonstrate the reasons for “depart[ing] from 

the usual requirement of a full security supersedeas bond.” 

Poplar Grove Planting & Ref. Co. v. Bache Halsey Stuart, Inc.,

600 F.2d 1189, 1190 (5th Cir. 1979). 

Courts addressing a motion for an unsecured stay under 

Rule 62(d) have expressed a willingness to grant such requests 

when: (1) the party’s “ability to pay is so plain that the cost 

of the bond would be a waste of money” or (2) “the requirement 

would put the [party’s] other creditors in undue jeopardy.” 

Olympia Equip. v. W. Union Tel. Co., 786 F.2d 794, 796 (7th Cir.

1986); Brooktree Corp. v. Advanced Micro Devices, Inc., 757 F.

Supp. 1101, 1104 (S.D. Cal. 1990); cf. Bolt, 2005 WL 2298423, at 

*2-3 (denying defendant’s motion for an unsecured bond because 

defendant was not a liquid company that could respond quickly to 

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a judgment against it and it failed to produce evidence of 

impracticability). 

In this case, plaintiff argues it is entitled to a stay 

as a matter of right pursuant to Federal Rule of Civil Procedure 

62(d) but contends a bond is not necessary and would be a waste 

of money because the Bank of Stockton “unquestionably has 

sufficient assets to pay the totality of” defendant’s attorney’s 

fees if defendant prevails on appeal. (Pl.’s Mem. at 4 (Docket 

No. 5-1).) As evidence of its ability to pay, plaintiff submits 

a copy of the “Selected Financial Data” report published by the 

Division of Financial Institutions of the California Department 

of Business Oversight, which reports that the Bank of Stockton 

had $2,412,663 total assets as of June 30, 2015. (Nally Decl. 

Ex. C (Docket No. 5-5).) In addition, defendant argues that it 

is a federally insured financial institution licensed by the 

California Division of Financial Institutions and the Federal 

Deposit Insurance Corporation. (Pl.’s Mem. at 2-3.) 

From the evidence presented, the court cannot conclude 

that plaintiff’s “ability to pay is so plain that the cost of the 

bond would be a waste of money.” Olympia Equip., 786 F.2d at

796. Though plaintiff has $2,412,663 in assets, plaintiff failed 

to establish how its assets compare to its liabilities. 

Plaintiff was unable to provide any clarity on this matter at the 

February 8, 2016 hearing. The court cannot determine plaintiff’s 

financial solvency or what its ability to pay will be upon 

resolution of this case based on the information provided. The 

court must therefore deny plaintiff’s request to waive the bond. 

Accordingly, the court will grant plaintiff’s motion 

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for a stay on the condition that it post a supersedeas bond in 

the amount of $24,175. According to Local Rule 151, “a 

supersedeas bond shall be 125 percent of the amount of the 

judgment unless the Court otherwise orders.” E.D. Cal. Local R. 

151(d). Defendant requested $19,340 in attorney’s fees and Judge 

Russell seems to have arbitrarily settled on a “partial order” of 

$15,000 without “taking a really close look at it.” (Bankr. Ct. 

Tr. 11:13-14.) As a result, this court will require a 

supersedeas bond that is 125 percent of $19,340--the total 

attorney’s fees requested by defendant. 

The bankruptcy judge’s order that plaintiff pay 

defendant $15,000 in attorney’s fees is therefore stayed pending 

appeal. To the extent the bankruptcy judge may have intended the 

$15,000 to serve as an equitable form of a bond, as defendant 

argues, the court gives deference to Judge Russell’s intent but 

must vacate that portion of his order. (See Def.’s Opp’n at 3.) 

The bankruptcy court did not have authority to deny plaintiff’s 

request for a stay and order plaintiff to immediately pay $15,000 

into a trust for defendant’s attorney simply because the court

was “more sympathetic to” defendant because defendant had won the 

case, had very few funds, and was now being forced to incur more 

fees due to plaintiff’s appeal. (Bankr. Ct. Tr. at 5:19-23.) 

IT IS THEREFORE ORDERED that plaintiff’s motion for a 

stay pending appeal of further adversary proceedings in 

bankruptcy court and enforcement of the bankruptcy court order 

granting defendant attorney’s fees be, and the same hereby is, 

GRANTED, upon the condition that plaintiff post a supersedeas 

bond in the sum of $24,175 within thirty days from the date this 

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Order is signed;

AND IT IS FURTHER ORDERED that the bankruptcy court’s 

order that plaintiff pay $15,000, or any amount whatsoever, into 

a trust account for defendant’s attorney be, and the same hereby 

is, VACATED AND SET ASIDE. 

Dated: February 9, 2016

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