Altabon Foods, Inc., In re, No. 91-56472

• Decision Date: 12 July 1993
• Docket Number: No. 91-56472
• Citation: 998 F.2d 718
• Parties: In re ALTABON FOODS, INC., a California Corporation, Debtor. COSSA & SONS, Appellant, v. TANI FARMS; Los Dos Valles Harvesting & Packing Co., Inc.; LCB Holding, Inc.; Martin A. Rechnitzer, Trustee; Fidelcore Business Credit Corp.; Aetna Life Insurance Company; George Griffith, Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 718

998 F.2d 718

In re ALTABON FOODS, INC., a California Corporation, Debtor COSSA & SONS, Appellant, v. TANI FARMS; Los Dos Valles Harvesting & Packing Co., Inc. LCB Holding, Inc.; Martin A. Rechnitzer, Trustee Fidelcore Business Credit Corp.; Aetna Life Insurance Company; George Griffith, Appellees.

No. 91-56472.

United States Court of Appeals Ninth Circuit.

Argued and Submitted June 8, 1993.

Decided July 12, 1993.

William A. Anderson and Thomas S. Clark, Arrache, Clark & Potter, Bakersfield, CA, for appellant.

Karl E. Block and Sandro F. Piedrahita, Robinson, Diamant, Brill & Klausner, Los Angeles, CA, for appellees.

Appeal from the United States Bankruptcy Appellate Panel of the Ninth Circuit.

Before: BROWNING, TANG, and BOOCHEVER, Circuit Judges.

PER CURIAM:

Cossa & Sons and its predecessor Cossa & Son grew hybrid broccoli and cauliflower and sold it to Altabon Foods for processing. Several of the contracts provided for payment periods of 45-60 days. After Altabon filed for bankruptcy, Cossa & Sons notified the Department of Agriculture of its intent to seek trust protection under the Perishable Agricultural Commodities Act (the Act) for $426,784.46 in unpaid deliveries of produce. LCB Holdings, a creditor of Altabon, filed an action requesting a determination of the extent and amount of Altabon's trust obligations under the Act, and Martin Rechnitzer, the trustee, filed counter and cross claims. Cossa & Sons filed an answer asserting its entitlement to trust protection. LCB and Rechnitzer jointly moved for summary judgment, arguing Cossa & Sons was not entitled to trust protection because the sales contracts contained payment periods in excess of 30 days, in violation of regulations promulgated by the Secretary of Agriculture. The bankruptcy court granted the motion and the Bankruptcy Appellate Panel affirmed.

We review de novo the Bankruptcy Appellate Panel's construction of the Perishable Agricultural Commodities Act. In re San Joaquin Food Service, Inc., 958 F.2d 938, 940 (9th Cir.1992). The Act provides:

Perishable agricultural commodities received by a commission merchant, dealer, or broker in all transactions, and all inventories of food or other products derived from perishable agricultural commodities, and any receivables or proceeds from the sale of such commodities or products, shall be held by such commission merchant, dealer, or broker in trust for the benefit of all unpaid suppliers or sellers of such commodities or agents involved in the transaction, until full payment of the sums owing in connection with such transactions has been received by such unpaid suppliers, sellers, or agents.

7 U.S.C. § 499e(c)(2). To preserve the benefits of the trust, the seller must give written notice of his intent to preserve trust benefits to the Secretary of Agriculture and the debtor

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, (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, or (iii) after the time the supplier, seller, or agent has received notice that the payment instrument promptly presented for payment has been dishonored.

7 U.S.C. § 499e(c)(3).

The Secretary of Agriculture issued regulations that establish "the time prescribed by which payment must be made" under § 499e(c)(3)(i) as between ten and twenty days, with ten days as the standard period. 7 C.F.R. § 46.2(aa). The regulations also provide, with respect to private agreements under § 499e(c)(3)(ii), that "[t]he maximum time for payment for a shipment to which a seller, supplier, or agent can agree and still qualify for coverage under the trust is 30 days after receipt and acceptance of the commodities...." 7 C.F.R. § 46.46(f)(2).

Cossa & Sons argues the Secretary did not have authority to establish a maximum time for private agreements to extend the payment period under § 499e(c)(3)(ii) because § 499e(c)(3)(ii) does not establish or mention a maximum period and contains no express grant of authority to the Secretary to establish such a period. ¹

"It is axiomatic that an administrative agency's power to promulgate legislative regulations is limited to the authority delegated by Congress." Bowen v. Georgetown University Hospital, 488 U.S. 204, 208, 109 S.Ct. 468, 471, 102 L.Ed.2d 493 (1988). "Faced with ... a problem of defining the bounds of its regulatory authority, an agency may appropriately look to the legislative history and underlying policies of its statutory grants of authority." United States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 132, 106 S.Ct. 455, 462, 88 L.Ed.2d 419 (1985); accord California v. Block, 663 F.2d 855, 860 (9th Cir.1981) ("Our inquiry must focus on the language, structure, and legislative history of the ... Act.... [O]ur primary task when testing the statutory authority of a challenged regulation must always be to determine the intent of Congress.").

The statute is silent on the question whether the Secretary of Agriculture may establish a maximum payment period for private agreements. Faced with this silence, the Secretary "appropriately look[ed] to the legislative history." The House report on § 499e(c) states:

[T]he Committee does not intend the trust to apply to any credit transaction that extends beyond a reasonable period. Under the bill the Secretary is required to establish, through rulemaking, the time by which, the parties to a transaction must agree payment on a transaction must be made, to qualify it for coverage under the trust. An agreement for payment after such time will not be eligible to receive the benefits of the trust.

H.R. No. 543, 98 Cong., 1st Sess. 7, reprinted in 1984 U.S.C.C.A.N. 405,...