Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_16-cv-00225/USCOURTS-caed-2_16-cv-00225-0/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

STEPHEN AUSTIN DEGUIRE, et al.,

Appellants,

v.

MARICOPA ORCHARDS, LLC,

Appellee.

No. 2:16-cv-00225-MCE

MEMORANDUM AND ORDER

The Bankruptcy Court below dismissed Appellants Stephen and Sandra 

DeGuire’s (“Appellants”) bankruptcy petition after determining that they were not eligible 

for Chapter 13 relief. Appellants timely noticed their appeal of that order and filed their

Motion for Stay Pending Appeal in this Court. ECF No. 7. Because Appellants have not

met their burden of justifying the imposition of a stay, the Motion is DENIED. 

BACKGROUND

Appellant Stephen DeGuire (“Stephen”) and his son, Corey Clinton DeGuire, are 

the sole principals of DeGuire Marketing, LLC (“DeGuire Marketing”). Appellee Maricopa 

Orchards, LLC (“Appellee”) retained DeGuire Marketing to sell the almonds it had grown 

on its behalf. Under the terms of their agreement, DeGuire Marketing was to remit the 

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proceeds of the almond sales, while keeping a small commission for itself. After 

Appellee delivered its 2013 almond crop, DeGuire Marketing apparently sold the crop 

and converted a portion of the proceeds to their own use. Accordingly, Appellee 

commenced litigation against DeGuire Marketing, Stephen, and Corey in state court. 

Stephen commenced his Chapter 13 case in the Bankruptcy Court in September 

2015 and moved for orders confirming a Chapter 13 plan. Appellee opposed that 

motion, filed a motion to dismiss, and also initiated an adversary proceeding against 

Stephen seeking a determination that he was indebted to Appellee and that such debt 

was non-dischargeable. The Bankruptcy Court ruled in favor of Appellee as to both 

motions. After initiating his appeal in this Court, Appellants applied for a stay pending 

appeal in the Bankruptcy Court. The Bankruptcy Court denied that application. 

DISCUSSION

A federal district court has broad discretion in deciding whether to issue a stay. 

Fed. Sav. & Loan Ins. Corp. v. Molinaro, 889 F.2d 899, 902 (9th Cir. 1989). In 

exercising such discretion, courts in the Ninth Circuit adhere to a sliding-scale balancing 

of four traditional factors. In re Vandenberg, 09-BK-23387, 2012 WL 1854298, at *2 

(Bankr. D. Ariz. May 21, 2012). The traditional factors are: (1) whether the applicant 

has made a strong showing that he is likely to succeed on the merits; (2) whether the 

applicant will suffer irreparable injury absent a stay; (3) whether issuance of the stay will 

injure other parties interested in the proceeding; and (4) the public interest. Id. The first 

two factors are the most critical, but a failure on any one factor requires the Court to 

deny the application for a stay. In re Rivera, 5:15-cv-04402, 2015 WL 6847973 at *2 

(N.D. Cal. Nov. 9, 2015). 

Here, Appellants’ failure to make a showing of either a likelihood of success on 

the merits or irreparable harm dooms the instant Motion. Appellants argue that they will 

suffer irreparable harm if the dismissal order is not stayed because they will be forced to 

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spend money defending themselves against Appellee’s state court action. That 

argument borders on the frivolous. As Judge Jaime explained in adjudicating

Appellants’ Motion for a Stay in the Bankruptcy Court, nearly all courts hold that litigation 

expenses do not constitute irreparable harm. ECF No. 11-1 at 118 (citing Mohamad v. 

Uber Techs., Inc., 115 F. Supp. 3d 1024, 1032-33 (N.D. Cal. 2015).1 

Furthermore, the likelihood that Appellants will prevail on the merits of their

appeal is, in this Court’s opinion, slim. Appellants’ primary contention is that the 

Bankruptcy Court erred in applying California’s trust-fund doctrine in finding Stephen

personally liable for the debts of DeGuire Marketing to Appellee. The trust-fund doctrine 

“imposes a fiduciary obligation on corporate officers and directors in favor of the 

corporation’s creditors when the corporation is insolvent.” In re Tsai, No. 2:13-BK27391, 2014 WL 1154032 at *6 (Bankr. C.D. Cal. Mar. 19, 2014). Insolvency can be 

established at the moment a corporation’s liabilities exceed its assets. Id. Appellants

argue that the Bankruptcy Court found that it was insolvent on September 23, 2015, but 

made no finding that it had breached a fiduciary duty imposed by the trust-fund doctrine. 

But the duties created by the trust-fund doctrine require a debtor to affirmatively avoid

dissipating, diverting, or diluting corporate assets. In re Houng, No. 13-56656, 2016 WL 

145841 at *2 (9th Cir. Jan. 11, 2016). Given that Stephen had a duty of avoidance, it 

was proper for the Bankruptcy Court to find that he was personally liable for DeGuire 

Marketing’s debt to Appellee even in the absence of affirmative wrongdoing between the 

date of insolvency and the filing of his Chapter 13 petition. Appellants’ Motion is 

therefore denied. 

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 1 The parties’ Requests for Judicial Notice (ECF Nos. 8, 11-1 and 14) are unopposed and 

GRANTED on that basis. 

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CONCLUSION

For the reasons set forth above, Appellants’ Motion for a Stay Pending Appeal 

(ECF No. 7) is hereby DENIED. 

IT IS SO ORDERED.

Dated: March 29, 2016

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