Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_02-cv-00011/USCOURTS-caed-2_02-cv-00011-1/pdf.json

Nature of Suit Code: 891
Nature of Suit: Agricultural Acts
Cause of Action: 28:1331 Fed. Question

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

CAL-NET PRODUCE, INC.,

Plaintiff,

v.

CHAVEZ PRODUCE, a sole

proprietorship, MANUEL

OCEGUERACHAVEZ, an individual

a/k/a MANUEL O. CHAVEZ, 

MANUEL OCEGUERA and MANUEL CHAVEZ; 

MIRIAM OCEGUERA, an individual;

MOISES OCEGUERA, an individual,

Defendants.

CIV S-02-0011 FCD PAN

FINDINGS AND RECOMMENDATIONS

—NFN—

On June 22, 2005, this court heard plaintiff’s motion for 

default judgment pursuant to Fed. R. Civ. P. 55(b)(2) against

defendants Chavez Produce and Manuel Chavez, neither of whom

appeared at the hearing nor filed a responsive pleading. For the

reasons set forth below, this court recommends that plaintiff’s

motion be granted and damages be awarded in the amount $13,857.75

Case 2:02-cv-00011-FCD-PAN Document 22 Filed 06/30/05 Page 1 of 7
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1 A “commission merchant” “means any person engaged in the business of

receiving in interstate or foreign commerce any perishable agricultural

commodity for sale, on commission, or for or on behalf of another” (7 U.S.C. §

499a(b)(5)); a “dealer” “means any person engaged in the business of buying or

selling in wholesale or jobbing quantities . . . any perishable agricultural

commodity in interstate or foreign commerce” (7 U.S.C. § 499a(b)(6)); and a

“broker” “means any person engaged in the business of negotiating sales and

purchases of any perishable agricultural commodity in interstate or foreign

commerce for or on behalf of the vendor or the purchaser” (7 U.S.C. §

499a(b)(7)).

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plus 3.38% prejudgment and postjudgment interest.

Plaintiff withdrew its motion for default judgment against

defendants Miriam Oceguera and Moises Oceguera on the ground that

neither was served with process. Although the Clerk of Court

entered default against each named defendant pursuant to Fed. R.

Civ. P. 55(a), only defendants Chavez Produce and Manuel Chavez

were served with the summons and complaint (see Return of Service

filed March 18, 2002, and exhibits in support of plaintiff’s

application for entry of default). Accordingly, the Clerk’s

entry of default against defendants Miriam Oceguera and Moises

Oceguera is vacated. Fed. R. Civ. P. 55(c), 4(m).

Plaintiff brought this action pursuant to the Perishable

Agricultural Commodities Act (“PACA” or “Act”), 7 U.S.C. § 499a

et seq. Enacted in 1930, PACA regulates the sale and purchase of

“perishable agricultural commodities” defined generally as

“[f]resh fruits and vegetables of every kind and character.” 7

U.S.C. § 499a(b)(4). The Act renders it unlawful for “any

commission merchant, dealer or broker”1 to “fail or refuse truly

and correctly to account and make full payment promptly in

respect of any transaction in any such commodity to the person

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2 A “retailer” “means a person that is a dealer engaged in the business

of selling any perishable agricultural commodity at retail.” 7 U.S.C. §

499a(b)(11).

3 “Any person not considered as a ‘dealer’ under clauses (A), (B), and

(C) may elect to secure a license under the provisions of section 499c of this

title [requiring licensing of all commission merchants, dealers and brokers],

and in such case and while the license is in effect such person shall be

considered as a ‘dealer.’” 7 U.S.C. § 499a(b)(6). 

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with whom such transaction is had; or to fail, without reasonable

cause, to perform any specification or duty, express or implied,

arising out of any undertaking in connection with any such

transaction; or to fail to maintain the trust as required under

499e(c) of this title.” 7 U.S.C. § 499b(4). 

Section 499e(c) imposed upon the proceeds from sales of 

perishable agricultural commodities a trust “for the benefit of

all unpaid suppliers or sellers of such commodities or agents

involved in the transaction, until full payment of the sums owing

in connection with such transactions has been received by such

suppliers, sellers, or agents.” 7 U.S.C. § 499e(c)(2); see also

In re San Joaquin Food Service, Inc., 958 F.2d 938, 939 (9th Cir.

1992) (“PACA establishes a nonsegregated trust in which a produce

dealer holds produce-related assets as a fiduciary until full

payment is made to the produce seller”). The district courts are

vested with jurisdiction to “entertain (i) actions by trust

beneficiaries to enforce payment from the trust . . .” 7 U.S.C.

§ 499e(b)(5).

The complaint, filed January 3, 2002, alleges that

defendants “were subject to license as a dealer or retailer2,

3

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under the PACA, with actual and/or constructive knowledge of the

PACA trust.” Complaint, para. 10. Defendants ordered and

received from plaintiff perishable agricultural commodities

(avocados) in a series of sales transactions from September 4,

2001, to September 17, 2001, in the total amount of $13,857.75. 

Id., para. 13. Plaintiff delivered invoices for each transaction

directing payment within 10 days of each shipment. Id., para.

14. Plaintiff fulfilled all duties required to preserve its PACA

trust benefits in the total principal amount of $13,857.75 (id.,

para. 20), including informing defendants of plaintiff’s

preservation of its PACA rights by setting forth on each invoice 

the statutory language of 7 U.S.C. § 499e(c)(4) (see n. 3, supra,

emphasis added). Decl. Of John Schmidt, President of Cal-Net,

para. 14, and Exhibit 1. Defendants made no payment despite

plaintiff’s repeated follow-up requests. Id., para. 15. 

Defendants failed to maintain the trust assets attributable to

plaintiff’s sale and make them available to satisfy defendants’

debt. Id., para. 21. Upon defendants’ receipt of plaintiff’s

produce, plaintiff became the beneficiary of defendant’s

statutory trust pursuant to 7 U.S.C. § 499e(b)(2). 

Plaintiff alleges against all defendants causes of action

for failure to preserve plaintiff’s assets pursuant to PACA’s

statutory trust provisions, failure to account for and make

prompt payment of plaintiff’s assets, unjust enrichment,

constructive trust, and declaratory judgment; and against

defendant Manuel Chavez a cause of action for breach of contract. 

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4 The complaint states Chavez Produce is a sole proprietorship owned by

defendant Manual Chavez who is “responsible for the management and control of

Chavez Produce.” Complaint, paras. 3, 7.

5

Plaintiff seeks damages in the amount $13,857.75 plus 10%

interest per annum on both past-due and postjudgment amounts,

$440.00 attorneys’ fees and $640.00 costs. 

The Clerk’s entry of default against defendants Chavez

Produce and Manuel Chavez4 effects their admission of the factual

allegations of plaintiff’s complaint. Rule 8(d), Federal Rules

of Civil Procedure. Accordingly, I find that (1) plaintiff

preserved and perfected its statutory rights under PACA by

providing written notice of such intent on its invoices to

defendants (see 7 U.S.C. §499e(c)(4), In re San Joaquin Food

Service, Inc., supra, 958 F.2d at 940, In re Marvin Properties,

Inc., 854 F. 2d 1183, 1186 (9th Cir. 1988)); (2) defendants are

dealers or retailers within the meaning of 7 U.S.C. § 499a(b);

(3) defendants have failed to compensate plaintiff for the

delivery of perishable agricultural commodities September 4

through 21, 2001, in the total amount $13,857.75; (4) defendants

hold this amount in trust for plaintiff pursuant to the

provisions of 7 U.S.C. § 499e(c); and (5) defendants are liable

to plaintiff in the principal amount $13,857.75.

The following factors should be considered by a court before

entering default judgment: “(1) the possibility of prejudice to

the plaintiff, (2) the merits of plaintiff’s substantive claim,

(3) the sufficiency of the complaint, (4) the sum of money at

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stake in the action, (5) the possibility of a dispute concerning

material facts, (6) whether the default was due to excusable

neglect, and (7) the strong policy underlying the Federal Rules

of Civil Procedure favoring decisions on the merits.” Eitel v.

McCool, 782 F.2d 1470, 1472 (9th Cir. 1986), at 1471-1472, citing

6 Moore's Federal Practice ¶ 55-05[2], at 55-24 to 55-26. There

is no matter of right to the entry of a default judgment and its

entry is within the court’s reasonable discretion, even when the

defendant is technically in default. Lewis v. Lynn, 236 F.3d

766, 767 (5th Cir. 2001); Draper v. Coombs, 792 F.2d 915, 924

(9th Cir. 1986); Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir.

1980).

Applying these considerations to the instant case, I find

(1) there is no possibility of prejudice to plaintiff, (2) 

plaintiff’s substantive claim is indisputably meritorious, (3)

the complaint is well pleaded, (4) the trust amount is modest,

(5) there appears no possibility of a dispute concerning material

facts, (6) there is no evidence defendants’ default was due to

excusable neglect, and (7) entering default judgment on these

facts and law is tantamount to a decision on the merits. 

Accordingly, I recommend that default judgment be entered

pursuant to Fed. R. Civ. P. 55(b)(2) against defendants Chavez

Produce and Manuel Chavez in the principal amount of $13,857.75. 

The court further recommends an award of postjudgment

interest pursuant to 28 U.S.C. § 1961 at the rate of 3.38%, and

an award of 3.38% prejudgment interest which this court finds

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“reasonable” under the standards set forth in Middle Mountain

Land and Produce Inc., supra, 307 F.3d at 1225-1226. 

The Clerk’s entry of default against defendants Miriam

Oceguera and Moises Oceguera should be set aside. Fed. R. Civ.

P. 55(c).

These findings and recommendations are submitted to the

Honorable Frank C. Damrell, Jr., the United States District Judge

assigned to this case. 28 U.S.C. § 636(b)(l). Written

objections may be filed within ten days after being served with

these findings and recommendations. The document should be

captioned “Objections to Magistrate Judge’s Findings and

Recommendations.” The failure to file objections within the

specified time may waive the right to appeal the District Court’s

order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

Dated: June 29, 2005. 

 /s/ Peter A. Nowinski 

 PETER A. NOWINSKI

 Magistrate Judge

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