Can a produce seller recover PACA trust assets transferred to a third party?
Often when a produce buyer is having financial difficulties, it is put in the position where the only money it has is your money, the PACA trust assets. To survive, the buyer ends up paying the PACA trust funds over to non-produce creditors or its Bank. The Bank may also receive money through foreclosure of its security interest or set-off. These recipients of PACA trust assets must return those assets to the PACA trust beneficiaries unless the recipient can establish that it was a bona fide purchaser for value when it received the assets. A bona fide purchaser for value must have received trust property for value and without notice of the fact the funds were transferred in breach of the PACA trust. The PACA trust beneficiary’s success in this type of action turns on the recipient’s knowledge of whether a trust existed and whether it had reason to believe the payment were in violation of the trust obligations. A trust beneficiary can secure its position by informing potential recipient
Related Questions
- Is a seller entitled to reimbursement of its attorneys, fees from other PACA trust creditors who attempt to "free ride" on the trust enforcement action?
- Are there any income tax consequences when assets are transferred to the Trust?
- Can a produce seller recover PACA trust assets transferred to a third party?
