In Collins Bros. Corp. v. Perrine, Adv. No. 05-1118, 2006 Bankr. LEXIS 2516 (Bankr. N.D. Ga. August 8, 2006) (Drake), the debtor was the owner and officer of a wholesale dealer of perishable agricultural commodities. The plaintiff, another dealer of commodities, obtained a pre-petition judgment against the debtor and his company for a debt the debtor’ s company owed to the plaintiff for goods delivered to the debtor’s company on credit. Plaintiff filed an adversary to except this debt from the debtor’s discharge pursuant to §523(a)(4) and filed a motion for summary judgment.
PACA provides for the creation of a nonsegregated, floating trust, under which a "dealer" who receives "perishable agricultural commodities" holds these commodities or the proceeds of their sale as a fiduciary until the seller has been paid in full. See 7 U.S.C. § 499e(c)(1)<!—->. "The trust automatically arises in favor of a produce seller upon delivery of produce." Frio Ice, S.A. v. Sunfruit, Inc., 918 F.2d 154, 156 (Cir. 1990)<!—-> (citing 7 U.S.C. § 499(e)(c)(2)<!—->). To preserve the benefit of the trust, the seller must file with the buyer and the United States Department of Agriculture written notice of its intent to preserve its rights. See 7 U.S.C. § 499e(c)(3)<!—->.
PACA creates such a trust only when a "dealer" receives perishable agricultural commodities. PACA defines a dealer as "any person engaged in the business of buying … in wholesale . . . quantities, as defined by the Secretary, any perishable agricultural commodity in interstate or foreign commerce, except that (A) no producer shall be considered as a "dealer" in respect to sales of any such commodity of his own raising; (B) no person buying any such commodity solely for sale at retail shall be considered as a "dealer" until the invoice cost of his purchases of perishable agricultural commodities in any calendar year are in excess of $ 230,000; and (C) no person buying any commodity other than potatoes for canning and/or processing within the State where grown shall be considered a "dealer" whether or not the canned or processed product is to be shipped in interstate or foreign commerce, unless such product is frozen or packed in ice, or consists of cherries in brine, within the meaning of paragraph (4) of this section." 7 U.S.C. § 499a(b)(6)<!—->.
The court found that the debtor, as a controlling person of the dealer he owned and managed, was personally liable for for any debt arising from the failure to pay plaintiff for the commodities purchased. See Red’s Market v. Cape Canaveral Cruise Line, Inc., 48 Fed. Appx. 328 (11th Cir. 2002). The court further held that the PACA created an express trust for purposes of §523(a)(4) upon delivery of the produce and proceeds, and that the failure of the debtor who has such a fiduciary duty to pay the seller constitutes a defalcation even where the debtor does not misappropriate the trust funds or otherwise personally benefit from the funds. However, on summary judgment, the plaintiff failed to allege sufficient facts to conclude that the debtor fell within the statutory definition of "dealer." Therefore, summary judgment was denied.