{"id":326,"date":"2024-04-26T12:02:49","date_gmt":"2024-04-26T12:02:49","guid":{"rendered":"https:\/\/usatrustedlawyers.com\/blog\/bankruptcy-paca-trust\/"},"modified":"2024-04-29T06:33:30","modified_gmt":"2024-04-29T06:33:30","slug":"bankruptcy-paca-trust","status":"publish","type":"post","link":"https:\/\/usatrustedlawyers.com\/blog\/bankruptcy-paca-trust\/","title":{"rendered":"Bankruptcy \u2013 PACA \u2013 Trust"},"content":{"rendered":"\n
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Where creditors have claimed that debts owed to them for the sale of produce are nondischargeable, the debtor is entitled to summary judgment on Count IV of the creditors\u2019 complaint, as the Perishable Agricultural Commodities Act does not create a trust that results in a \u201cfiduciary capacity\u201d sufficient to meet the requirements of 11 U.S.C. \u00a7523(a)(4).\n<\/p>\n

\u201cBefore me are cross-motions for partial summary judgment on the non-dischargeability of alleged claims for defalcation while acting in a fiduciary capacity within the meaning of 11 U.S.C. \u00a7523(a)(4) that require me to examine the intersection of trusts created under the Perishable Agricultural Commodities Act, 7 U.S.C. \u00a7499a, et<\/i> seq<\/i>. (\u2018PACA\u2019) and whether such trusts satisfy the \u2018fiduciary capacity\u2019 requirement under \u00a7523(a)(4).\n<\/p>\n

\u201cThe plaintiffs, B.C. Produce, Inc., Community-Suffolk, Inc., John Cerasuolo Co., Inc., J. Bonafede Co., Inc., Lisitano Produce, Inc., and Boston Tomato & Packaging, LLC (collectively, the \u2018Plaintiffs\u2019), filed a four-count complaint [Dkt. No. 1] (the \u2018Complaint\u2019) against the defendant, Jason K. Kaloyanides (the \u2018Defendant\u2019 or \u2018Kaloyanides\u2019), containing the following counts: (a) Count I (determination of the amounts due to each of the Plaintiffs); (b) Count II (violation of Mass. Gen. Laws ch. 93A, \u00a7\u00a72 and 11); (c) Count III (nondischargeability under \u00a7523(a)(2)); and (d) Count IV (nondischargeability under \u00a7523(a)(4)). The parties stayed discovery while they pursued cross-motions for partial summary judgment on certain discrete legal questions related to Count IV of the Complaint as to whether a trust arising under PACA pursuant to 7 U.S.C. \u00a7499e(c) (a \u2018PACA Trust\u2019) creates the kind of fiduciary relationship that can give rise to a nondischargeable debt under \u00a7523(a)(4) and, if so, whether such debts subject to a PACA Trust are per se<\/i> nondischargeable under \u00a7523(a)(4).<\/p>\n

\u201c\u2026 The Plaintiffs contend partial summary judgment is appropriate because their sales and deliveries of wholesale quantities of produce to Atlas Produce and Provisions LLC, an entity which they assert Kaloyanides controlled, were subject to a PACA Trust arising pursuant to 7 U.S.C. \u00a7499e(c), and that such PACA Trust satisfies the requirements for the fiduciary relationship under \u00a7523(a)(4). \u2026 The Plaintiffs assert that Kaloyanides committed a defalcation while acting in a fiduciary capacity for the purposes of \u00a7523(a)(4) by failing to pay amounts owed to Plaintiffs as to which a PACA Trust was established. \u2026 In response, Kaloyanides seeks partial summary judgment that the PACA debts are dischargeable because PACA does not create a trust that results in a \u2018fiduciary capacity\u2019 sufficient to meet the requirements of \u00a7523(a)(4) and that, even if a PACA Trust did create a sufficient fiduciary relationship, the mere nonpayment under a PACA Trust does not constitute a \u2018defalcation\u2019 within the meaning of \u00a7523(a)(4). \u2026\n<\/p>\n

\u201cFor the reasons discussed below, I conclude that PACA does not create a trust that results in a \u2018fiduciary capacity\u2019 sufficient to meet the requirements of \u00a7523(a)(4), and I will enter partial summary judgment in favor of Kaloyanides on Count IV of the Complaint. \u2026\n<\/p>\n

\u201cFor the reasons above, there exists no disputed issue of fact with respect to whether the Plaintiffs can demonstrate that Kaloyanides committed a \u2018defalcation\u2019 while \u2018acting in fiduciary capacity\u2019 for the purpose of \u00a7523(a)(4) by failing to pay amounts owed to Plaintiffs as to which a PACA Trust was established. Consequently, I will enter summary judgment in favor of Kaloyanides on Count IV.\u201d<\/p>\n

In re: Kaloyanides, Jason K. (Lawyers Weekly No. 04-007-24) (17 pages) (Panos, J.) (Chapter 7 Case No. 21-10644-CJP; AP No. 21-01085-CJP) (April 15, 2024).<\/i>\n<\/p>\n

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