The opinion of the court was delivered by: Kevin Nathaniel Fox United States Magistrate Judge
Plaintiffs Corporacion Fruticola de Chincha, SAC ("CFC") and J & C Enterprises, Inc. ("JC"), brought this action pursuant to the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. §§ 499a-499s, as amended, against Watermelon Depot, Inc. ("WDI"), Kil Ho Lee, Ju Gil Joen, a/k/a John Joen ("Joen"), Dae Won Produce Distributor, Inc., d/b/a Yonkers Produce, Serk Hon Lee ("Lee"), Dae Won Lee and Group Joa Corp. ("GJC"), to recover damages for:
(1) conversion; (2) breach of the PACA obligation to account and make prompt payments; (3) breach of an oral consignment contract; (4) breach of the PACA trust obligation; and (5) an accounting. JC also sought injunctive relief compelling the surrender and disgorgement of PACA trust assets. On November 7, 2005, the assigned district judge granted a motion for judgment by default to: (i) JC "in the liquidated amount of $24,095.50 plus costs and disbursements of this action in the amount of $150.00, amounting in all to $24,245.50;" and (ii) CFC "in the liquidated amount of $213,559.76 plus costs and disbursements of this action in the amount of $150.00, amounting in all to $213,709.76." On February 7, 2007, the assigned district judge granted Joen's motion to vacate the default judgment entered against him, pursuant to Fed. R. Civ. P. 60(b)(1), after determining that: (a) Joen's default was not willful; (b) Joen may have a meritorious defense to the extent that he can establish he was not an officer of Watermelon Depot, Inc.; and (c) the plaintiffs will not be prejudiced substantially if the default against Joen is vacated. Pursuant to 28 U.S.C. § 636(c), the parties consented to having a non-jury trial of this action, presided over by a United States magistrate judge. In the joint pre-trial order, CFC indicated it would pursue, at trial, its conversion claim against Joen, seeking $213,559.76 in damages and JC indicated it would pursue, at trial, a claim for breach of a PACA trust obligation against Joen, seeking $24,095.50 in damages and injunctive relief compelling the surrender and disgorgement of PACA trust assets.
That trial was held on March 19, 2008. The following are the Court's findings of fact and conclusions of law, made pursuant to Rule 52 of the Federal Rules of Civil Procedure.
CFC is a Peruvian corporation which exports grapes, avocados and citrus to the United States and other countries and Gonzalo Bedoya ("Bedoya") is its general manager. In January 2005, Joen and Roberto Soto ("Soto"), a JC representative, visited Bedoya's office in Peru. Joen told Bedoya he represented WDI and was interested in taking grapes from Bedoya on consignment.*fn1 During that visit, Bedoya contends Joen referred to WDI as "my business," repeatedly. At that time, Bedoya and Joen were negotiating the terms of the consignment, but Bedoya needed more information about WDI before agreeing to consign his grapes to it. Joen never mentioned that he needed to contact anyone else to approve the terms of the agreement or that he had partners. At the end of the meeting in Peru, Joen invited Bedoya to visit WDI in New York, to see "my warehouse" and "my customers." Bedoya testified that giving his grapes on consignment to a United States seller required, on his part, a high degree of trust in the seller. Subsequent to their meeting in Peru and according to the industry practice, Joen provided Bedoya information about WDI from the "blue book," a directory of companies and persons in the produce business. The "blue book" listed Joen as the only individual associated with WDI.
Thereafter, Bedoya and Joen entered into an agreement providing that CFC would ship the grapes from Peru to WDI, on a consignment basis, such that WDI would: (a) sell the grapes for the market price; (b) deduct a commission of ten percent from the sale proceeds as well as the reasonable and necessary sale expenses, specifically freight; and (c) return promptly, to CFC, the net proceeds from the sale. Joen communicated with Bedoya via e-mail messages, signing his e-mail messages with "watermelon depot John Joen" and "John Joen." Joen also communicated to Bedoya, via an e-mail message, that he received the consigned grapes. In an e-mail message to Bedoya, dated February 1, 2005, Joen promised to send the money owed to Bedoya's bank. Bedoya testified that the payments were personally guaranteed by Joen many times during their telephone conversations, and during a visit Bedoya made to WDI's facilities, in New York.
In March 2005, Bedoya visited Joen in New York, at Joen's invitation, to see "his premises" and the arrival of the containers. During that visit, Joen showed Bedoya WDI's offices and warehouse, took him to the Hunts Point Market and to lunch. Bedoya testified that Joen drove Bedoya around personally and was always "in charge of his business." Joen also took Bedoya to dinner, with approximately fifteen other WDI employees, and paid for all the meals as well as Bedoya's hotel room. Bedoya and Joen communicated in English and Joen never indicated he was not proficient in communicating via e-mail or that he was using someone else to communicate electronically on his behalf. According to Bedoya, during his telephone conversations with Joen, Joen indicated "he was the one sending his emails, saying I'll put an email to you now." When Bedoya visited Joen in New York, he observed Joen handle cash, a "big bundle of money," approximately $6,000 to $8,000, which he used "to pay people." Joen also received cash and, Bedoya observed while in Joen's office, kept a lot of cash in his pocket.
By April 6, 2005, WDI sold all the grapes CFC consigned to it. Joen told Bedoya, during an April 6, 2005 telephone conversation, that he had a few problems collecting the money for the grapes sold, and agreed to transfer $250,000 to CFC by April 15. In an e-mail communication to Joen, dated April 6, 2005, Bedoya memorialized their telephone conversation of that date: "to confirm what we spoke over the phone. By April 15th you will transfer US$250,000.00 to us and final account by the end of April. Please reconfirm." According to Bedoya, on April 21, 2005, he and Joen had another telephone conversation during which Bedoya noted Joen had failed to fulfill his payment commitment, and Joen asked for more time. During the first week of May, 2005, Bedoya made numerous telephone calls to WDI, asking to speak with Joen or someone in accounting, but the receptionist informed him, each time, that he had to speak with Joen, who was not available. After these unsuccessful attempts to reach Joen by telephone, Bedoya sent Joen an e-mail message, on May 6, 2005, stating in pertinent part:
I am trying to call you to know if you have already made the transfer you promised. Please answer my email confirming the transfer of US$50,000 starting today for week 18, another US$50,000 week 19, another US$50,000 week 20, another US$50,000 week 21 and final transfer when you come to Peru beginning of June. Final accounting balance US$213,559.76 (FOB) including the US$1.50 per box of Expenses that you have discounted. (we will discuss this when you come to Peru)
Bedoya testified he received an e-mail message from Joen, dated May 26, in which Joen detailed how and when he would make payments to CFC. According to Bedoya, the final account balance due to CFC by WID is $213,559.76. He testified that he arrived at that amount based on the amounts stated in "the liquidation" documents sent to him by Joen. The liquidation documents introduced into evidence at the trial demonstrate the following amounts were owed by WDI: (a) $13,378.99, document dated March 1, 2005; (b) $13,378.99, document dated March 10, 2005, (c) $26,900.93, document dated March 14, 2005; and (d) $10,783.62, document dated March 29, 2005. Bedoya testified that, although they never agreed on it, Joen discounted "$1.50 per box of expenses." Notwithstanding the fact that the total amount of the liquidation documents introduced into evidence at trial is $64,442.53, Bedoya testified, WDI owes $213,559.76 to CFC, based on the United States Agriculture Market reports for the market value of the grapes during the period when they were shipped.
Joen testified that, in 2000, he met Lee at a produce company where they both worked. After a few years, Lee started his own business, WDI, in Hunts Point Market, and offered Joen employment as a sales manager in his new company, which Joen accepted. Joen testified that he was employed by WID as a sales manager from November 2004 to May 2005, and worked under Lee's direction. Joen stated he: (a) did not own stocks in WDI; (b) was not WDI's officer; (c) had no authority over corporate funds; (d) had no signature authority for banking transactions; and (e) did not participate in managerial decisions with respect to corporate finances. Joen testified it was his understanding that Lee was WDI's sole shareholder. According to Joen, he never had control over any PACA trust funds and never participated in any activity with the intent to convert the plaintiffs' funds or to defeat the defendants' PACA trust rights. Joen recalled that he met Bedoya during his sales trip to Peru. He stated that his business card did not identify him as WDI's owner or officer. Joen testified that he spoke to Bedoya in a mixture of the Spanish and English languages and, although he "referred to things with the word 'my,'" he was not using that word "in an ownership sense." Joen testified he would sometime sell produce for cash but he denied handling cash on behalf of WDI or that he possessed cash in his hands. Joen also testified WDI had financial problems before closing, in May 2005, and he was not paid for the last three months he worked there. Joen stated he does not know how to use e-mail to communicate and that all his e-mail communications were composed by WDI's secretary and sent by the secretary only upon Lee's order. Joen recalled directing that an e-mail message be sent to Bedoya, acknowledging approximately $162,313.59 was owed to CFC, for around ten or eleven containers of grapes, and proposing a payment plan for that amount. Joen stated that no money was paid to CFC by WDI for the grapes consigned. However, Joen denied that he had any authority to make payments but stated that he urged Lee to make the payments to CFC.
Joen also testified that, while he was employed by WDI, Lee concocted a plan to form GJC in order to raise capital necessary to pay WDI's creditors. According to Joen, he intended to contribute $125,000 to GJC and it was planned that he be its president. However, Joen testified, he refused to sign the proposed GJC shareholder agreement because it was "highly favorable" to Lee, and he ...