Atlantic Tropical Produce Corp. v. El Nene Meat & Food Corp.

SUMMARY ORDER Appeal from final judgment entered March 12, 2009 in the United States District Court for the Southern District of New York (Chin, J.). Appellants were secured creditors of El Nene Meat & Food Corp. (“El Nene”), a food retailer, who foreclosed on El Nene’s assets when the retailer became insolvent. Atlantic Tropical Produce Corp. (“Atlantic”) supplied produce to El Nene and was owed payment by the retailer at the time Appellants foreclosed. Following a bench trial, Atlantic prevailed on its claim under the Perishable Agricultural Commodities Act of 1930 (“PACA”), 7 U.S.C. § 499a et seq., and was awarded $188,810.05 plus interest and costs. We assume the parties’ familiarity with the underlying facts, the procedural history, and the issues presented for review. Appellants argue principally that the district court erred by charging them with the burden of proving that the assets they received in satisfaction of their secured claims were not trust property under 7 U.S.C. § 499e(c). We find no error. Third-party non-PACA creditors (such as Appellants) bear the burden of proving that assets received from PACA debtors are not trust property under 7 U.S.C. § 499e(c). A & J Produce v. Bronx Overall Econ. Dev. Corp., 542 F.3d 54, 58 (2d Cir.2008) (per curiam) (charging a third-party non-PACA creditor — the Bronx Overall Economic Development Corp.— with the burden of proving that assets it received from a PACA debtor were not PACA trust assets). Appellants’ brief also fairly raises a challenge to the district court’s finding that the assets they received were in fact PACA trust property. We review for clear error, Amalfitano v. Rosenberg, 533 F.3d 117, 123 (2d Cir.2008), and find none. There was testimony that El Nene’s produce department was profitable at the time Appellants foreclosed. The PACA trust therefore held assets sufficient to satisfy Atlantic’s claim. See In re Kornblum & Co., Inc., 81 F.3d 280, 286 (2d Cir.1996) (holding that all the PACA trust assets of a given PACA debtor are held in a single, undifferentiated pool available to satisfy all the PACA creditors of that PACA debtor). Moreover, there was testimony that El Nene commingled PACA trust assets with non-trust assets, and Appellants offered little or no evidence that the assets they received were purchased with segregated non-trust assets — i.e., as *493 sets not part of the commingled pool. Because Appellants bear the burden of proof on this issue (as noted previously) the district court therefore fairly concluded that the assets they received were trust assets. We have reviewed Appellants’ remaining arguments and find them to be without merit. For the foregoing reasons, the judgment of the district court is hereby AFFIRMED.