Sons, Inc., 466 F. Supp. 1025 (E.D. Pa. 1978) (same). Most significantly, the Eighth Circuit recently rejected the bankruptcy court's reasoning in Lombardo, finding that "in light of the [Hull] court's implicit rejection of the course of dealing argument and its emphasis upon the necessity of written agreements to protect the interests of produce sellers, this Court concludes that neither [plaintiff] waived its right to demand payment within thirty days of delivery as a result of [its] course of dealing under the written agreements." In re Lombardo, at *3 This Court, agreeing with the Eighth Circuit decisions in Hull and Lombardo, holds that where, as in the instant case, plaintiffs comply with the written requirements of PACA's trust provisions, defendants' "course of dealing" defense must be rejected. Consequently, summary judgment is granted against defendant 4-XXX.
B. Personal Liability of Philip and Alice Melfi
Plaintiffs seek to hold Philip and Alice Melfi personally liable for their losses. In general, individuals are not personally liable for a corporation's torts solely on the basis of their position as a corporate stockholder, officer or director. However, an officer who causes a corporate trustee to commit a breach of trust which causes a loss to the trust is personally liable to the beneficiaries for that loss. West Indian Sea Island Cotton Ass'n v. Threadtex, Inc., 761 F. Supp. 1041, 1054 (S.D.N.Y. 1991); In re Baird, 114 Bankr. 198, 204 (9th Cir. BAP 1990).
In the instant case, it is clear that Philip Melfi was the president of 4-XXX since at least June 1991;
that he drew a salary from 4-XXX of approximately $ 150,000 in 1991; and that he signed checks totalling $ 113,000, representing a loan repayment by 4-XXX to Nick Melfi Enterprises, a company controlled by Philip Melfi.
The use of PACA trust funds by 4-XXX for such items as salary and loan payments constitutes a dissipation of PACA trust funds and a breach of 4-XXX's fiduciary duties as trustee. See C.H.Robinson Co. v. Trust Co. Bank, N.A., 952 F.2d 1311, 1314-15 (11th Cir. 1992) (bank would be required to refund PACA trust funds it received as loan payments if it had notice of a breach of trust); In re Richmond Produce Co., Inc., 112 Bankr. 364, 376-78 (Bkrtcy. N.D. Cal. 1990) (same); Morris Okun, Inc. and Finest Fruits, Inc. v. Harry Zimmerman, Inc. and Harry Zimmerman, 814 F. Sup. 346 (S.D.N.Y. 1993) (salary paid from PACA trust fund is dissipation of trust assets). Because Philip Melfi, as a corporate officer, knowingly caused 4-XXX to breach its duty as a trustee, he is personally responsible for the ensuing loss to the trust beneficiaries for those sums which he dissipated. Id. See also In re Nix, 1992 WL 119143 (M.D.Ga., April 10, 1992) (same). Thus, plaintiff's motion for summary judgment must be granted against Philip Melfi.
Although Alice Melfi owned 100% of the 4-XXX stock in 1991, she was never an officer, director, or employee of the company. Furthermore, in 1989, when the $ 250,000 4-XXX "loan" went through her checking account, she owned no 4-XXX stock and 4-XXX did not owe money to plaintiffs. Nevertheless, Plaintiffs seek to hold Alice Melfi personally liable on either the theory that she was no more than a "shill" for her husband or because "a 100% stockholder of a corporation must be presumed to be exercising some kind of control over the company's affairs." Plaintiffs' Memorandum of Law in Support of Motion for Summary Judgment at p. 9, n. 9; Plaintiffs' Reply Memorandum at p. 2.
Plaintiffs' first argument amounts to piercing the corporate veil. Although Alice Melfi admitted that she never attended any stockholders' meetings, and although it appears that other corporate formalities were exceedingly lax,
there is insufficient evidence in the record at this time to pierce the corporate veil. See e.g. Gorrill v. Icelandair/Flugleidir, 761 F.2d 847, 853 (2d Cir. 1985) (discussing factors that could lead to piercing of a corporate veil).
As to plaintiffs' second argument, they submit no authority for the proposition that a 100% stock holder must be presumed to exercise control over a company's affairs. Indeed, this Court believes that there are many small corporations in which an individual may own 100% of the stock and yet choose -- for entirely legitimate purposes -- not to exercise any day-to day control over the company's affairs. Consequently, plaintiffs' motion for summary judgment against Alice Melfi must be denied.
C. Cross-Motions for Summary Judgment by Third-Party Plaintiffs and Third-Party Defendants
On March 10, 1993, third party plaintiffs served their "cross-motion" for summary judgment against third party defendants Ludlum and Cassidy. The motion has a return date of March 15, 1993.
Ludlum and Cassidy correctly note that this motion is not a cross-motion, that third-party plaintiffs had not obtained permission from this Court to file a motion for summary judgment as required by Rule 2 of the Court's Rules, and that the motion failed to provide for at least ten days notice as required by Rule 56(c). See Winbourne v. Eastern Airlines, Inc., 632 F.2d 219, 223 (2d Cir. 1980) (noncompliance with notice provisions of Rule 56(c) is procedural defect which vitiates the entry of summary judgment); see also Court Rule 2(a) (requiring 15 days notice for all motions). For these reasons, the third-party motion for summary judgment is denied.
Rather than wait for the parties to file formal requests for permission to move for summary judgment, the Court will construe the papers it has already received as requests to make such motions. For the following reasons, these requests are denied.
Although Cassidy was listed as the president of 4-XXX until May 13, 1991, he notes deposition testimony from the corporate secretary to the effect that he had no actual responsibility in running the corporation since May or September 1990. Moreover, there is no evidence in the record tending to show that he breached his fiduciary duties to 4-XXX.
Although Ludlum paid ten dollars for an option to purchase 4-XXX stock, he does not appear to have been a 4-XXX shareholder during the period at issue here. Furthermore, although he was listed as a vice-president of 4-XXX until May 2, 1991, he apparently considered that position to be "in name only" and he never exercised any control over 4-XXX's financial affairs.
As with Cassidy, there is no evidence in the record tending to show that either Ludlum or Cassidy breached any fiduciary duties to 4-XXX. Because, third-party defendants have raised material issues of fact relevant to any liability they may have as to 4-XXX, third-party plaintiffs may not file a new motion for summary judgment against them.
Plaintiffs, on the other hand, have not only shown that Cassidy and Ludlum were officers of 4-XXX at the time it was transacting business with MVS, but allege that (1) Cassidy and Ludlum had personally conducted business with MVS; (2) were aware that 4-XXX was late in its payments to MVS and to other trust beneficiaries in the spring of 1991; and (3) had received salaries and or commissions during that time period. Because third-party plaintiffs have raised these material issues, third-party defendants may not file a motion for summary judgment against them.
Accordingly, for the aforementioned reasons, plaintiffs' motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure is granted as to defendants 4-XXX and Philip Melfi and denied as to defendant Alice Melfi. Third party plaintiffs' motion and third-party defendants' cross motions for summary judgment are denied.
LEONARD D. WEXLER
UNITED STATES DISTRICT JUDGE
Dated: Hauppauge, New York
April 22, 1993