1982), aff'd, 41 B.R. 903 (N.D.N.Y. 1984); 1976 U.S.Code Cong.
& Admin.News 2267.
The statutory trust created by Section 196(b) is not a
transitory trust as defendants' papers assume. Instead, A & B
had been the trustee of such a trust for unpaid sellers of
livestock ever since A & B became a packer or the date of
enactment of 7 U.S.C. § 196, whichever event occurred later.
When livestock was transferred to A & B by beneficiaries under
the Act, that livestock became impressed with a statutory trust
and any proceeds or accounts receivables created by sale of
livestock similarly were impressed with a statutory trust for
seller beneficiaries. Filippo v. S. Bonaccurso & Sons, Inc.,
466 F. Supp. 1008, 1012 n. 2 (E.D.P.A. 1978). For a trustee to
subordinate those trust assets to the claims of a third party
is not consonant with its role as a statutory trustee for the
unpaid seller. A & B, as trustee, was required to preserve
these assets since they were held by it in trust. Accordingly,
A & B as trustee did not have power to enter into the
Inter-Creditor Agreement which purported to subordinate trust
assets,*fn6 i.e. A & B's prior security interest in the assets
of Rotches Inc. Bankers Trust, by collecting the debt owed to
it by Rotches Inc. from assets of Rotches Inc., to wit,
collections of Rotches Inc.'s accounts receivable, did so
without honoring the inalienable security interest of A & B as
trustee in those assets of Rotches Inc.
Nor can it be claimed that, due to the date of the
Inter-Creditor Agreement, Bankers Trust's rights antedated
those of the Trust. The Trust here was in the nature of a
revolving trust for the benefit of unpaid sellers of livestock.
In re Gotham Provision Co., Inc., 669 F.2d 1000 at 1010 (5th
Cir. 1982). Furthermore, Bankers Trust cannot claim it was
unaware of the limitations placed on A & B due to the statutory
trust. As a commercial bank, it is charged with constructive
knowledge of legislation affecting extensions of credit in a
specific industry to which a potential commercial borrower or
co-creditor belongs. See, e.g., Voest-Alpine International
Corp. v. Chase Manhattan, 707 F.2d 680, 685 (2nd Cir. 1983).
Accordingly, the Court holds that A & B's accounts receivable
from Rotches, Inc. can be recovered by Liberty Mutual in this
action to the extent that Liberty Mutual can establish that
they are valid claims of the statutory trust for funds required
to make payments under the statutory trust to the Sellers and
not claims asserted on behalf of A & B in a non-trustee
Lastly, plaintiff seeks to amend its complaint to assert a
claim that A & B was a beneficiary of a Section 196(b) trust
over Rotches, Inc.'s assets. Rotches, Inc. does meet the
statutory definition of a packer under 7 U.S.C. § 191, but,
according to the unrebutted affidavit of David A. Rotches dated
May 22, 1984 (Defendant's Exhibit C), Rotches, Inc. did not
purchase livestock from A & B, a requirement for a Section
196(b) trust. Liberty Mutual argues that the statutory
definition of livestock means "cattle, sheep, swine, horses,
mules or goats — whether live or dead," 7 U.S.C. § 182, and
that the fact Rotches, Inc. purchased dressed hogs from A & B
as found by the Judicial Officer of the Agriculture Department
means that Rotches, Inc. purchased livestock and is a statutory
trustee under Section 196(b). Liberty Mutual argues that a
dressed hog is the equivalent of a dead hog. However, it
ignores the statutory definition of meat food products as "all
products and by-products of the slaughtering and meat packing
industry — if edible." 7 U.S.C. § 182. The term "dressed,"
means "killed, bled and more or less completely prepared for
cooking." Websters 3rd Int'l Dictionary (unabridged) at 689,
3rd Ed. 1966, G.C. Merriam. Indeed, any farm boy knows a dead
hog must be bled, disemboweled and have its bristles removed
before it is dressed. A
dressed hog need only be cut into parts for cooking purposes.
Thus, under the statutory definition, dressed hogs would be
meat food products and not livestock. Indeed, the Department of
Agriculture Judicial Officer's detailed findings of fact as to
the nature of the transactions between A & B and Rotches, Inc.,
on which plaintiff relies for evidentiary findings, held that
the relationship between A & B and Rotches, Inc. was not such
as to invoke the statutory trust permitted by § 196(b) because
Rotches, Inc. purchased only meats and meat food products from
A & B. Plaintiff's Exhibit 15, at 11.*fn7 Since there is no
counter evidence cited by plaintiff on this motion, the Court
finds that the sales by A & B to Rotches, Inc. did not consist
of livestock and as a result, there was no statutory trust on
behalf of A & B as to Rotches, Inc.'s funds. Plaintiff's
Exhibit 15, 4, 11.
Since the issue upon which these motions were decided by the
court was not briefed by counsel, partial summary judgment for
plaintiff will be entered thirty days from the date of entry of
this order unless defendants file papers with the Court by
February 18, 1991, demonstrating error in the holding.
A conference to arrange for a hearing on damages will be held
on February 14, 1991 at 9:00 a.m. at the United States Court
house, Courtroom 302.
IT IS SO ORDERED.