Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-04710/USCOURTS-cand-3_05-cv-04710-0/pdf.json

Parties Involved:
Jose L. Ayar
Defendant
Jalisco Produce
Defendant
Rey Rey Produce SFO, Inc.
Plaintiff

Document Text:

United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

REY REY PRODUCE SFO, INC., a

California corporation,

Plaintiff,

 v.

JOSE L. AYAR, an individual doing

business as JALISCO PRODUCE,

Defendant. 

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No. C-05-4710 SC

ORDER GRANTING

PLAINTIFF'S MOTION

FOR ENTRY OF DEFAULT

JUDGMENT

I. INTRODUCTION

Plaintiff Rey Rey Produce SFO Inc. ("Plaintiff") brought this

action against Jose Ayar ("Defendant"), alleging causes of action

for, inter alia, breach of contract and for violations of the

Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. § 499a,

et seq. Because Defendant, even though properly served with a

summons and the Complaint, did not respond to the Complaint, the

Clerk of the Court entered default against him. 

Presently before the Court is Plaintiff's motion for entry of

default judgment. For the reasons stated herein, the Court GRANTS

Plaintiff's motion for entry of default and AWARDS Plaintiff

$8,129.50.

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Case 3:05-cv-04710-SC Document 16 Filed 07/07/06 Page 1 of 7
United States District Court

For the Northern District of California

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II. BACKGROUND

Plaintiff, a seller and shipper of agricultural commodities

in the wholesale market, sold and shipped perishable agricultural

commodities at the cost of $9,725.45 to Defendant at his request,

and sent invoices ("Invoices") detailing the amounts. See

Declaration of Manuel Reynoso in Support of Motion for Entry of

Default Judgment ("Reynoso Decl.") ¶¶ 7, 10. After Defendant

failed to pay, Plaintiff brought this action alleging causes of

action for (1) breach of contract; (2) enforcement of statutory

trust provisions of the Perishable Agricultural Commodities Act, 

7 U.S.C. § 499a et seq.; (3) violation of the Perishable

Agricultural Commodities Act; and (4) declaratory relief. See

Complaint ("Compl.") at 7-8. After Plaintiff filed the Complaint,

Defendant made some payments, reducing the amount owed to

$6,226.95. See Reynoso Decl. ¶ 14. 

Plaintiff asserts that Defendant, who is not an infant or an

incompetent person, was properly served with a summons and the

Complaint, has not filed any response. See Plaintiff's Motion for

Entry of Default Judgment ("Pl's. Mtn.") ¶ 1. The Clerk of the

Court entered default against Defendant on January 10, 2006. 

Plaintiff filed the present motion on May 30, 2006. 

Plaintiff contends that he is owed a total of $8,129.50. 

This amount is the sum of $6,226.95 for the original order of

perishable goods, $923.96 in pre-judgment finance charges at 18%

per annum, and $978.59 for attorney's fees. See Reynoso Decl. 

¶ 16. Plaintiff contends that the rate of post-judgment interest

should be 18%. 

Case 3:05-cv-04710-SC Document 16 Filed 07/07/06 Page 2 of 7
United States District Court

For the Northern District of California

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III. DISCUSSION

"The general rule of law is that upon default the factual

allegations of the complaint, except those relating to the amount

of damages, will be taken as true." Geddes v. United Fin. Group,

559 F.2d 557, 560 (9th Cir. 1977). Therefore, for purposes of

this Motion, the Court accepts as true the facts as portrayed in

the Complaint.

"However, entry of default does not automatically entitle the

non-defaulting party to entry of a default judgment regardless of

the fact that the effect of entry of a default is to deem

allegations admitted." In re Villegas, 132 B.R. 742, 746 (9th

Cir. 1991). Rather, "the decision to enter a default judgment is

discretionary." Alan Neuman Productions, Inc. v. Albright, 862

F.2d 1388, 1392 (9th Cir. 1988). 

Among the factors which a trial court is to consider when

exercising its discretion as to entry of a default judgment are

the "merits of plaintiff's substantive claim" and the "sufficiency

of the complaint." Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th

Cir. 1986). 

The Court will now examine the merits of the case. 

Plaintiff submitted copies of the Invoices as Exhibits. At the

bottom of each Invoice, the following statement appears:

The perishable Agriculture [sic] commodities listed on this

invoice are sold subject to the statutory trust authorized by

section 5(c) of the Perishable Agricultural Commodities Act,

1930 (7 U.S.C. [sic] 499e(c)). The seller of these

commodities retains a trust claim over these commodities, all

inventories of food or other products derived from these

commodities, and any receivables or proceeds from the sale of

these commodities until full payment is received. ALL

ADJUSTMENTS AND SHORTAGES MUST BE CLAIMED WITHIN 24 HOURS.

Case 3:05-cv-04710-SC Document 16 Filed 07/07/06 Page 3 of 7
United States District Court

For the Northern District of California

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1 This wording is required by 7 U.S.C. § 499e(c)(4) in order

to preserve the benefits of the trust created by a PACA

transaction. 

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TERMS: PACA A [sic] SERVICE CHARGE OF 1 1⁄2% AT THE ANNUAL

PERCENTAGE RATE OF 18% WILL BE CHARGED ON ALL ACCOUNTS NOT

PAID WITHIN THIRTY DAYS. BUYER AGREES TO PAY REASONABLE

ATTORNEY'S FEES IF COLLECTION IN [sic] NECESSARY.1

This statement is clear and binds the recipient to an agreement

to pay, if necessary, a service charge and reasonable attorney's

fees. The Court has no record of Defendant's objections to this

agreement, either when the Invoices were sent or after he received

a copy of the Complaint. Because Plaintiff submitted sufficient

and uncontested evidence to support his claims, the Court has no

doubt as to the merits of Plaintiff's substantive claims.

Having settled that, the entry of default judgment in the

matter at hand is appropriate provided that the Complaint is

sufficient as a matter of law.

A. Breach of Contract

In California, the elements for a cause of action for breach

of contract are: (1) the existence of a contract, (2) plaintiff's

performance or excuse for non-performance, (3) defendant's breach

and (4) damages resulting to plaintiff because of the breach. 

See Armstrong Petroleum Corporation v. Tri-Valley Oil and Gas

Company, 116 Cal. App. 4th 1375, 1391, FN 6 (Cal. Ct. App. 2004).

Plaintiff has pled a claim for relief. As alleged in the

Complaint, the Invoices constitute contracts, Plaintiff completed

performance by delivering the goods, Defendant has breached by

failing to pay for the goods, and Plaintiff has been damaged by

Defendant's failure to pay for the goods. 

Case 3:05-cv-04710-SC Document 16 Filed 07/07/06 Page 4 of 7
United States District Court

For the Northern District of California

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B. Enforcement of Statutory Trust Provisions of PACA

Under 7 U.S.C. § 499e(c)(2), "commission merchant, dealer or

brokers" must hold the "receivables and proceeds" from the sale of

the received agricultural products "in trust for the benefit of

all unpaid suppliers or sellers of such commodities or agents

involved in the transaction, until full payment...has been

received." Unpaid sellers "shall lose the benefits of such trust"

unless they provide written notice of their intent to preserve the

benefits of the trust to the merchant or dealer. 7 U.S.C. 

§ 499e(c)(3). One such method is to provide notice through

invoices or bills which have verbatim the language quoted above. 

Based on the foregoing, the Court finds that Plaintiff has

stated a claim for relief. Specifically, Plaintiff has provided

Defendant with notice as required by statute.

C. Violation of Perishable Agricultural Commodities Act

The Court finds that Plaintiff has stated a cause of action

under PACA by alleging that Defendant should have and has not held

in trust the proceeds from the sales. 

D. Declaratory Relief

Plaintiff seeks an order from the Court declaring that

Plaintiff's trust claims are superior to any other claims

Defendant might assert to its accounts receivable to the extent

that the accounts receivable "constitute the corpus of the PACA

trust funds to which Plaintiff is the beneficiary." Compl. ¶ 26. 

Plaintiff also seeks an order from the Court declaring that the

trust funds never became property of Defendant under 11 U.S.C. 

§ 541, that Plaintiff's claim takes priority over Defendant's

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United States District Court

For the Northern District of California

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2

 The claim under 11 U.S.C. § 541 is premature because no

bankruptcy petition, either voluntary or involuntary, has been

filed. Also, the Court cannot find authority in a (possibly

mistakenly cited) statute entitled "7 U.S.C. § (b)(4) and 7" to

issue an order declaring what Plaintiff has asked the Court to do. 

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secured and unsecured claims, and that only funds in excess of the

trust funds necessary to pay the trust claims are property of

Defendant or the estate of the Defendant. See Compl. ¶ 27. 

The Court can grant only that relief that the law allows. 

Through a PACA trust, the "sellers of the commodities maintain a

right to recover against the purchasers superior to all creditors,

including secured creditors." Boulder Fruit Express et al. v.

Transportation Factoring, Inc., 251 F.3d 1268, 1270 (9th Cir.

2001).

Based on this, the Court declares that, under PACA,

Plaintiff's trust claims are superior to those of all creditors,

including secured creditors.

Because this Order places Plaintiff's claim first on the list

of creditors, both secured and unsecured, the Court finds it

unnecessary to issue an order declaring the other rights Plaintiff

has asked the Court to uphold.2

IV. CONCLUSION

The Court GRANTS Plaintiff's motion for the entry of default

judgment. As a consequence, the Court AWARDS Plaintiff a total of

$8,129.50. This amount is the sum of $6,226.95 for the original

order of perishable goods, $923.96 in pre-judgment finance charges

at 18% per annum, and $978.59 for attorney's fees. The rate of

post-judgment interest is 18%. 

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United States District Court

For the Northern District of California

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The Court also DECLARES that Plaintiff's PACA trust claim is

superior to the claims of other creditors, both secured and

unsecured. 

IT IS SO ORDERED.

Dated: July 7, 2006

 

UNITED STATES DISTRICT JUDGE

Case 3:05-cv-04710-SC Document 16 Filed 07/07/06 Page 7 of 7