The Perishable Agricultural Commodities Act (7 U.S.C. §499a et seq.) imposes a trust under 7 U.S.C. §499e(c) for unpaid suppliers, sellers and agents of fresh fruits and fresh vegetables, whether or not frozen or packed in ice. The list of fresh fruit and vegetables is shown on the United States Department of Agriculture (USDA) website: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5082566.
This trust can apply to all assets, including real estate as proceeds from the resale of the fruits and vegetables, acquired by a commission merchant, dealer or broker. The trust may be terminated only by paying all suppliers in full prior to the applicable transaction, but this is something we cannot determine with certainty and we cannot rely on.
Federal law does not require that the unpaid suppliers, sellers and agents file a notice, lis pendens, or claim of the trust in the real property records. This trust can be superior to the rights of third parties, such as mortgagees, dealing with the commission merchant, dealer or broker. Even a bankruptcy cannot avoid the priority of the trust.
Examples of parties whose assets may be subject to a PACA trust include:
- Food processors, truckers, food wholesalers, grocery wholesalers, food service firms, produce dealers, packers, distributing companies, canners, processing plants, wineries, distilleries, and breweries.
- Grocery chains and supermarket chains.
- Chain restaurants and other major restaurants.
A company name may suggest the applicability of PACA, such as a name that includes “food” or a type of food, “produce,” “packing,” or “distributor.”
If your transaction involves a party whose assets may be subject to a PACA trust, you must contact a Stewart Title Guaranty Company underwriter.
We may require a PACA title exception such as the following:
“Any trust, right, interest or claim that may exist, arise, or be asserted against the Title under or pursuant to the Perishable Agricultural Commodities Act of 1930, as amended, 7 U.S.C. §499a, et seq., or any similar state or federal law.”
The Packers and Stockyards Act (7 U.S.C. §§181 et seq.) also establishes a similar trust on assets of packers to protect livestock producers. In 7 U.S.C. §182, “livestock” is defined as cattle, sheep, swine, horses, mules, or goats, whether dead or alive, and “poultry” is defined as chickens, turkeys, ducks, geese and other domestic fowl.
A “packer” whose assets are subject to the trust is defined in 7 U.S.C. §191 as a person in the business of (a) buying livestock in commerce for purposes of slaughter, or (b) manufacturing or preparing meats or meat food products for sale or shipment in commerce, or (c) marketing meats, meat food products, or livestock products in an unmanufactured form acting as a wholesale broker, dealer, or distributor in commerce.
Examples of parties subject to the PSA trust may include:
Stockyards, supermarket chains, wholesalers and retailers of meat products, meat packing companies, meat processing companies, farms that purchase livestock and poultry for slaughter, and grocery chains.
If your transaction involves a party whose assets may be subject to a PSA trust, you must contact a Stewart Title Guaranty Company underwriter.
We may require a PSA title exception such as the following:
“Any trust, right, interest or claim that may exist, arise, or be asserted against the Title under or pursuant to the Packers and Stockyard Act of 1921, as amended, 7 U.S.C. §181, et seq., or any similar state or federal law.”
If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.
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