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E. ARMATA, INC. v. PLATINUM FUNDING CORP.

May 26, 1995

E. ARMATA, INC., COOSEMANS SPECIALTIES, INC., D'ARRIGO BROS. CO. OF NEW YORK, INC., FIERMAN PRODUCE, INC., FINEST FRUITS, INC., FRUITCO CORP., G&B PRODUCE INC., GOODIE BRAND PACKING CORP., HUNTS POINT TOMATO CO., INC., JACOBSON PRODUCE INC., S. KATZMAN, INC., KING SOL PRODUCE CORP., KLEIMAN & HOCHBERG, INC., L&P FRUIT CORP., MORRIS OKUN, INC., C.H. ROBINSON, INC., D.M. ROTHMAN CO., INC., RUBIN BROS. PRODUCE CORP., SHAPIRO & COHEN, INC., PAUL STEINBERG ASSOCIATES, INC., MARTIN STRIKS & SON, INC., M. TROMBETTA & SONS, INC., VEN-CO PRODUCE, INC., WISHNATZKI & NATHEL, INC., Plaintiffs,
v.
PLATINUM FUNDING CORP. and RON ANDREWS OF L.I., INC. d/b/a F. WILSON SMITH, Defendants.


ROBERT P. PATTERSON, JR., U.S.D.J.


The opinion of the court was delivered by: ROBERT P. PATTERSON, JR.

ROBERT P. PATTERSON, JR., U.S.D.J.

 Twenty-four plaintiffs bring this action as unpaid sellers of perishable agricultural commodities under the Perishable Agricultural Commodities Act, 7 U.S.C. § 499a-s ("PACA"). This Court has jurisdiction pursuant to 7 U.S.C. § 499e(c)(4).

 Defendants are Ron Andrews of L.I., Inc. d/b/a/ F. Wilson Smith (collectively, "Andrews"), a distributor of foods and produce located at 22 Hudson Drive, Stony Point, New York, and Platinum Funding Corp., a servicing agent, and Platinum Funding Series I.L.P., a limited partnership which provided the funds for Platinum's operations (collectively, "Platinum").

 A non-jury trial was conducted on March 2, 7 and 14, 1995. This opinion and order constitutes the Court's Findings of Fact and Conclusions of Law.

 Plaintiffs are sellers of perishable agricultural commodities who claim not to have received payments of $ 80,466.60 billed for perishable agricultural products sold and delivered to Andrews, a dealer in perishable agricultural commodities, and licensed under PACA on June 5, 1993 (Pl. Ex. 26). Pursuant to 7 U.S.C. § 499(e)(c)(2), Andrews held all of its inventory as well as accounts receivable and proceeds of sales of perishable agricultural commodities in a statutory trust for the benefit of its unpaid PACA suppliers.

 On May 25, 1994 Andrews closed its business (Tr. at 76 [Ross]), *fn1" and on May 25 or 27, 1994 it stopped receiving mail. Thereafter, all plaintiffs timely preserved their rights under Section 499(e)(c)(3) by filing the requisite notices with the U.S. Department of Agriculture ("U.S.D.A.") and mailing to Andrews PACA notices covering $ 80,466.60 in PACA goods and sold and delivered to Andrews (Pl. Exs. 1-26). It is these claims for which plaintiffs seek recovery from defendants.

 Background

 After receiving its PACA license, Andrews entered into a Factoring Agreement with Platinum on June 23, 1993 (Def. Ex. 11; Pl. Ex 27) in which it agreed, for a period of nine months, that it would sell, and in which Platinum agreed it would purchase, Andrews' accounts receivable. Pursuant to the Factoring Agreement, Andrews agreed to tender Platinum all of sellers' invoices to be rendered to sellers' customers, which Platinum would then deliver to the customers, together with notices of Andrews' irrevocable assignment of payment to Platinum. *fn2" Andrews also delivered to Platinum a Security Agreement, a Performance Guaranty by its officers, and Uniform Commercial Code financing statements for filing in the applicable jurisdictions. Andrews was to receive the aggregate amounts collected by Platinum less aggregate advance amounts Andrews received and less Platinum's fees and expenses. The rate of advance payments and fees were set forth in separate Account Agreements actually denoted as Purchase and Sale Agreements (Def. Ex. 13), to which were attached the invoices assigned.

 On January 1, 1994, three months prior to the termination date of the Factoring Agreement, Platinum and Andrews entered into a superseding factoring agreement to cover the next fifteen months and the parties agreed upon an advance rate of 65% (Pl. Ex. 11). Tr. at 90-93 (Ross).

 Andrews' President Elliot Ross testified that the superseding factoring agreement and higher advance rate were entered into because he had told officers of Platinum that he needed larger advances in order to pay his bills and because January and February would be slow months since country clubs and certain other customers would be closed those months. Tr. at 93-94 (Ross). Ross testified that he again told Platinum executives Sig Laster and Al Levy in February that Andrews had cash flow problems. Ross also discussed with Laster that Andrews had been posted by a credit rating agency, and Laster told Ross "I saw your name appeared in the book again." Tr. at 102. The "book" referred to PMS, the Food Industry's Clearinghouse Weekly Bulletin to which Platinum subscribed and which on February 21, 1994 listed Andrews as having had accounts turned over for collection by two creditors. Pl. Ex. 32. At or around this time, Ross again told Platinum executives he was having trouble paying his bills. Tr. at 99-100 (Ross).

 During this period Platinum furnished Andrews with what it denominated "over advances," i.e., advances of funds collected but not yet due to be paid under the terms of the parties' Agreements. Def. Ex. 14. Total "over advances" to Andrews by Platinum totalled $ 943,527.51, $ 751,860.85 of which occurred between January and May 1994.

 On March 7, 1994 and March 25, 1994, at Platinum's request, National Code Corporation caused corporate good standing and U.C.C. lien searches to be made ...


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