The opinion of the court was delivered by: WILLIAM C. CONNER
This case arises under the Perishable Agricultural Commodities Act ("PACA"), which creates statutory trusts in favor of unpaid sellers of perishable goods. Plaintiffs are unpaid sellers seeking trust benefits totalling $ 191,180.56 from the defendant Seo Young Ho in his capacity as the sole shareholder, officer, and director of Tradefield Produce Corporation ("Tradefield"). Before the court is plaintiffs' motion for summary judgment on their claims of liability against Seo. For the reasons set forth below, we grant the motion with regard to liability but reserve the issue of damages for trial.
Prior to filing a petition for bankruptcy in 1991, the defendant's company, Tradefield, operated as a produce wholesaler out of Hunts Point Market in the New York City area. Between late 1989 and 1990, Tradefield purchased a total of $ 347,000 worth of commodities on credit in a series of transactions with the plaintiffs which it then resold to local Korean markets in Manhattan, Brooklyn and Queens. Despite numerous demands from the plaintiffs, however, Tradefield did not pay for its purchases and in January, 1991 filed a Chapter 7 petition for bankruptcy. Plaintiffs then filed this suit against Seo personally, claiming that he violated his obligations under PACA to hold the commodities and their proceeds in trust for the plaintiffs.
A. PACA and the Issues Arising Thereunder
In 1984, Congress amended PACA by creating a statutory trust that must be maintained by each purchaser of perishable goods in favor of unpaid suppliers and sellers of such commodities. The statute provides in pertinent part:
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.
While the trust is automatically created under the statute, the unpaid seller will lose the trust benefits unless he "gives 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 within thirty calendar days after expiration of the time prescribed by which payment must be made, as set forth in regulations issued by the Secretary." 7 U.S.C. § 499e(c)(3) (emphasis added). The regulations issued by the Secretary of Agriculture require that payment be made within 10 days of receipt of the goods. 7 C.F.R. 46.2(aa)(5). Thus the unpaid seller must give notice to both the purchaser and the Secretary within 40 days of the purchaser's receipt of the goods.
Pursuant to their summary judgment motion, plaintiffs' attorney submitted an affidavit stating that plaintiffs "have timely filed notices with the Secretary of Agriculture." The affidavit did not mention any notice given to Tradefield or Seo, however. In his response, Seo submitted an affidavit stating that Tradefield received notice of plaintiffs' intent to preserve the trust benefits only after Tradefield filed for bankruptcy on February 6, 1991. As the goods at issue were received in late 1989 and early 1990, notice in February 1991 would not comply with the forty-day requirement under the statute. In May, 1994, we held a hearing to decide whether Tradefield, and hence Seo, had received timely notice that plaintiffs intended to preserve their trust rights under PACA.
This Opinion incorporates the Court's findings of fact based on the evidence adduced at that hearing, pursuant to Rule 52, Fed. R. Civ. Pro.
B. The Evidentiary Hearing
W&N claims that Seo is personally liable for $ 83,000
worth of produce purchases made by Tradefield in late 1989 through April 1990 and that these monies are subject to the PACA trust provisions. Ira Nathel, an accounts receivable supervisor at W&N, testified that on December 12, 1989, W&N sent a letter by certified mail (return receipt requested) to the United States Department of Agriculture ("USDA") and Tradefield informing them of W&N's intent to invoke its trust rights. On December 20, 1989, W&N sent the same letter by regular mail to Tradefield. This filing covered invoices from October 23, 1989 through December 12, 1989. W&N received the return receipt from the USDA mailing, ...