San Joaquin Food Service, Inc., In re
| Decision Date | 14 January 1992 |
| Docket Number | No. 90-16433,90-16433 |
| Citation | 958 F.2d 938 |
| Parties | In re SAN JOAQUIN FOOD SERVICE, INC., Debtor. BOWLIN & SON, INC., Appellant, v. SAN JOAQUIN FOOD SERVICE, INC., Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Joseph Choate, Jr., Choate & Choate, Los Angeles, Cal., for appellant.
Michael H. Meyer, Fresno, Cal., for appellee.
Appeal from the Ninth Circuit Bankruptcy Appellate Panel.
Before TANG, PREGERSON and FERGUSON, Circuit Judges.
Bowlin & Son, Inc., ("Bowlin") appeals the decision of the bankruptcy appellate panel ("BAP") affirming the bankruptcy court's decision denying Bowlin's motion for relief from automatic stay. Bowlin seeks to recover $238,000 from the debtor, San Joaquin Food Service, Inc., ("San Joaquin") on the ground that this sum is held apart from the bankruptcy estate in a trust created by the federal Perishable Agricultural Commodities Act, 1930, as amended, ("PACA") for the benefit of produce sellers such as Bowlin. The BAP concluded that Bowlin was not entitled to this sum because Bowlin failed to comply with PACA provisions when it did not include the terms of payment on its invoices to San Joaquin. We affirm.
Bowlin is a supplier of fresh produce. In the course of business, Bowlin delivered to San Joaquin produce for which San Joaquin owes Bowlin $238,000. Bowlin argues that San Joaquin holds this sum for Bowlin's benefit in a trust created under PACA, 7 U.S.C. §§ 499a-499t. The money, Bowlin contends, is therefore separable from San Joaquin's bankruptcy estate. Bowlin seeks relief from the automatic stay imposed when San Joaquin declared bankruptcy in order to recover from this separate trust. See 11 U.S.C. § 362(a), (d).
PACA establishes a nonsegregated trust in which a produce dealer holds produce-related assets as a fiduciary until full payment is made to the produce seller. C & E Enters., Inc. v. Milton Poulos, Inc. (In re Milton Poulos, Inc.), 947 F.2d 1351, 1352 (9th Cir.1991) (per curiam). "The trust automatically arises in favor of a produce seller upon delivery of produce and is for the benefit of all unpaid suppliers or sellers involved in the transaction until full payment of the sums owing has been received." Id.; see also 7 U.S.C. § 499e(c)(2). There is no dispute that when a party establishes an interest in a PACA trust, the trust proceeds are separate from a PACA trustee's bankruptcy estate. See C & E Enters., Inc. v. Milton Poulos, Inc. (In re Milton Poulos, Inc.), 107 B.R. 715, 718 (Bankr. 9th Cir.1989), aff'd-in-part and rev'd-in-part, 947 F.2d 1351 (9th Cir.1991).
In establishing the trust, however, produce sellers must take certain steps to preserve their right to benefit from the trust. See id. at 1352-53. The relevant PACA provision provides:
The unpaid supplier, seller, or agent shall lose the benefits of such trust unless such person has given written notice of intent to preserve the benefits of the trust to the commission merchant, dealer, or broker and has filed such notice with the Secretary [of Agriculture] within thirty calendar days (i) after expiration of the time prescribed by which payment must be made, as set forth in regulations issued by the Secretary, [or] (ii) after expiration of such other time by which payment must be made, as the parties have expressly agreed to in writing before entering into the transaction.... When the parties expressly agree to a payment time period different from that established by the Secretary, a copy of any such agreement shall be filed in the records of each party to the transaction and the terms of payment shall be disclosed on invoices, accountings, and other documents relating to the transaction.
7 U.S.C. § 499e(c)(3) (emphasis added).
As contemplated in § 499e(c)(3), Bowlin and San Joaquin agreed in writing to a "payment time period different from that established by the Secretary." Specifically, the parties agreed that payment would be due within 30 days of the date of each invoice, as opposed to the Secretary's 10 day period which would otherwise control their transactions. 1 Because Bowlin and San Joaquin entered a separate, written agreement deviating from the prescribed payment time period, § 499e(c)(3) required that "the terms of payment shall be disclosed on invoices" sent by Bowlin to San Joaquin. Bowlin concedes that it failed to comply with this requirement.
San Joaquin does not otherwise challenge Bowlin's compliance with other statutory requirements to obtain the benefits of the PACA trust. Thus, there is no question that Bowlin gave San Joaquin the written notice of intent to preserve the benefits of the trust, and filed such notice with the Secretary of Agriculture, as mandated by § 499e(c)(3). The BAP concluded, however, as did the bankruptcy court, that Bowlin's failure to include the terms of payment on its invoices voided its rights in the PACA trust. The BAP therefore affirmed the denial of Bowlin's motion for relief from automatic stay. The issue presented for our review is whether Bowlin's failure to include the terms of payment in its invoices to San Joaquin prevents Bowlin from benefiting from the PACA trust.
The BAP's construction of PACA and its trust requirements is reviewed de novo. See Western Dist. Council of Lumber Prod. & Indus. Workers v. Louisiana Pac. Corp., 892 F.2d 1412, 1417 (9th Cir.1989) ().
In Consolidated Mktg., Inc. v. Marvin Properties, Inc. (In re Marvin Properties, Inc.), 854 F.2d 1183 (9th Cir.1988), we affirmed the denial of benefits of a PACA trust to a seller of produce who had failed to give the required notice of intent to preserve trust benefits directly to the buyer. Id. at 1186. The produce seller in fact filed a notice of intent with the Secretary, and the Secretary in turn acknowledged the filing, sending a copy of the acknowledgment to the buyer. Id. at 1184-85. The seller thus argued that it was sufficient for purposes of § 499e(c)(3) that the buyer received from the Secretary an acknowledgment of the seller's filing of its notice preserving trust benefits. Id. at 1186. We disagreed, concluding that the language of the statute unambiguously required the seller to give notice directly to the buyer. Id. Literal compliance is required.
In our case also the language of the statute is unambiguous. Subsection 499e(c)(3) specifically prescribes the means of preserving PACA trust benefits. Unless the terms of the statute are met, it specifies that the benefits of the trust are lost. Where "the parties expressly agree to a payment time period different from that established by the Secretary," the statute mandates that "the terms of payment shall be disclosed on invoices, accountings, and other documents relating to the transaction." 7 U.S.C. § 499e(c)(3) (emphasis added). The clear command of this language is that a failure to include payment terms in invoices divests the seller of trust benefits. Bowlin's failure to include the terms of payment on its invoices to San Joaquin nullifies Bowlin's interest in the PACA trust. The BAP correctly affirmed the denial of relief from automatic stay.
Contrary to Bowlin's argument, this is not a case where "substantial compliance" with statutory requirements excuses Bowlin's omission. First, the invoice requirement at issue is a clear mandate of Congress included in the statute itself, rather than a...
To continue reading
Request your trial
-
Skyline Potato Co. v. Hi-Land Potato Co.
...estate.” C.H. Robinson Co. v. Alanco Corp., 239 F.3d 483, 487 (citing In re Kornblum, 81 F.3d at 284;In re San Joaquin Food Serv., Inc., 958 F.2d 938, 939 (9th Cir.1992)). As amongst beneficiaries, when a PACA trustee becomes insolvent, the legislative intent suggests, and courts have enfor......
-
Skyline Potato Co. v. Hi-Land Potato Co.
...Co. v. Alanco Corp., 239 F.3d 483, 487 (2d Cir.2001) (citing In re Kornblum, 81 F.3d 280, 284 (2d Cir.1996) ; In re San Joaquin Food Serv., Inc., 958 F.2d 938, 939 (9th Cir.1992) ). As amongst beneficiaries, when a PACA trustee becomes insolvent, the legislative intent suggests, and courts ......
-
Skyline Potato Co. v. Tan-O-On Mktg., Inc., CIV 10-0698 JB/RHS
...Robinson Co. v. Alanco Corp., 239 F.3d 483, 487 (2d Cir. 2001)(citing In re Kornblum, 81 F.3d at 284; In re San Joaquin Food Serv., Inc., 958 F.2d 938, 939 (9th Cir. 1992)). As amongst beneficiaries, when a PACA trustee becomes insolvent, the legislative intent suggests, and courts have enf......
-
Harper v. U.S. Seafoods Lp
...265 F.3d 787, 795-96 (9th Cir.2001) (Department of Transportation regulations); Bowlin & Son, Inc. v. San Joaquin Food Serv., Inc. (In re San Joaquin Food Serv., Inc.), 958 F.2d 938, 940-41 (9th Cir.1992) (Perishable Agricultural Commodities Act). But see United States v. Nielsen, 1 F.3d 85......
-
Table of Cases
...U.S. 823 (1992): 14.8(1) San Carlos Apache Tribe v. United States, 417 F.3d 1091 (9th Cir. 2005): 7.2(2) San Joaquin Food Servs., In re, 958 F.2d 938 (9th Cir. 1992): 9.5(4), 9.5(4)(a), 9.5(4)(b) Sandefer Oil & Gas, Inc. v. Duhon, 961 F.2d 1207 (5th Cir. 1992): 7.8(2)(j) Santa Rosa Band of ......
-
§ 9.5 - Crop Secured Transactions
...7 U.S.C. § 499e; 7 C.F.R. § 46.1. The trust continues until the supplier receives full payment. In re San Joaquin Food Servs., Inc., 958 F.2d 938 (9th Cir. 1992); 7 U.S.C. § 499e(c)(2). The trust assets (crops and crop proceeds) do not become property of the bankruptcy estate of any bankrup......