The opinion of the court was delivered by: LEONARD D. WEXLER
Mid-Valley Sales Corp. (also referred to as Mid-Valley Produce Corp.) ("MVS") and Probiotic Marketing of Idaho, Inc. ("PMI") ("plaintiffs") bring the instant suit against 4-XXX Produce Corp. ("4-XXX"), Philip Melfi and Alice Melfi (collectively, "defendants") pursuant to the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. § 499a, et. seq., seeking payment for $ 185,012.32 of potatoes sold to 4-XXX in 1991. Defendants have impleaded Herbert O. Cassidy ("Cassidy") and Harry D. Ludlum ("Ludlum") ("third-party defendants"), former officers of 4-XXX, seeking indemnification and or contribution as to any sums for which defendants are found liable. Now before the Court are cross-motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure between plaintiffs and defendants and between third-party plaintiffs and third-party defendants. For the reasons stated below, plaintiffs' motion is granted in part and denied in part; all other motions are denied.
The following material facts are not disputed by the parties. Alice Melfi was the sole shareholder of 4-XXX during 1991, but she was never an officer, director or employee of the company and she did not participate in its management. Her husband, Philip Melfi, was president of 4-XXX since June 1991, had authority to sign checks for the corporation since 1990, and earned approximately $ 150,000 in salary and commissions from 4-XXX in 1991.
On or about August 31, 1989, Philip Melfi gave his wife a 4-XXX check for $ 250,000 made out to her name. Alice Melfi deposited this check in her personal checking account and then returned the proceeds to her husband. The money, which was apparently intended as a loan to Philip and/or Alice Melfi to finance the construction of their private house, was allegedly given to Philip Melfi to induce him to work for 4-XXX. It was to be repaid when the Melfis obtained a mortgage on the house. Although they subsequently did obtain such a mortgage, the loan was never repaid in full. The Melfis' house is held solely in Alice Melfi's name.
In 1991, Philip Melfi wrote two 4-XXX checks totalling $ 113,000 to Nick Melfi Enterprises, allegedly in partial repayment of a loan that Nick Melfi Enterprises had made to 4-XXX. Nick Melfi Enterprises, whose address is Philip and Alice Melfi's home address, is a corporation wholly owned by Philip Melfi and his sister, and was apparently formed solely for the purpose of distributing property from their father's estate.
Plaintiff MVS is owed $ 56,375 for various truck loads of fresh Maine potatoes sold to 4-XXX in the Spring of 1991. Within the 30-day period after 4-XXX failed to pay for the commodities, MVS filed timely written notices with 4-XXX and with the Secretary of Agriculture indicating its intent to preserve its rights under the PACA trust provisions.
On numerous occasions, MVS and PMI delivered perishable goods to 4-XXX and received payment well beyond the period of time when such payment was due pursuant to the written agreements between the parties. Defendants contend that as a result of this "course of dealing," the PACA trust provisions are not applicable to this case.
A. "Course of Dealing" Defense Under PACA
In 1984, Congress amended PACA by creating a statutory trust which must be maintained by purchasers of fresh produce who are licensed under PACA in favor of unpaid suppliers and sellers of such commodities. The trust attaches to all commodities, assets and inventories, including receivables and proceeds derived from the sale of such commodities by the PACA licensees. 7 U.S.C. § 499e(c). It is undisputed that 4-XXX was a PACA licensee. It is also undisputed that plaintiffs have not been paid for their produce and that they have filed timely written notices to preserve their rights as PACA trustees.
PACA establishes a 10-day time period within which a PACA seller must be paid. 7 C.F.R. § 46.2(aa)(5). However, before entering a transaction, the parties, by written agreement, can extend this time period up to 30 days without negating the PACA trust provisions. 7 C.F.R. § 46.46(1)&(2). Any written agreement extending the payment period beyond 30 days would negate those provisions. In the instant case, MVS and PMI had ...