A Fresno and Reedley-based fruit grower and packer is objecting to a motion filed by debtors to bankrupt Prima Wawona to approve the sale of the company’s assets.
Trinity Fruit Company argued that the motion is preventing it from receiving payment for perishable products that it provided.
The backstory: Prima Wawona, the nation’s largest peach producer, filed Chapter 11 bankruptcy proceedings on Oct. 13 with the intent to sell the company to an outside party.
- Prima Wawona’s lenders could take control of the company through a debt-to-equity conversion if it is not sold to a third-party.
- In its objection, Trinity argues that it has the right to receive payment for its products under the Perishable Agricultural Commodities Act (PACA), which passed Congress in 1930 and protects businesses dealing in fresh and frozen fruits and vegetables by enforcing a code of fair business practices.
- Congress amended PACA in 1984 to increase the legal protection for unpaid sellers and suppliers of perishable agricultural commodities until they were paid.
The big picture: Trinity supplied wholesale quantities of produce to Wawona Packing, a debtor to Prima Wawona, on Sep. 6. When Prima Wawona declared bankruptcy, Trinity was owed the principal amount of $42,790, and the company contends it is also owed interest at an 18 percent annual rate and attorney’s fees.
- On Oct. 13, debtors filed a motion to pay around $1.1 million in outstanding PACA claims. Four days later the court entered an interim order granting the PACA motion to authorize debtors to pay PACA claims.
- Trinity says in its objection that the court order did not require debtors to pay the PACA claims and that the debt owed to the company remains outstanding.
- Trinity argues that the debtors’ motion to approve the sale of Prima Wawona’s assets fails to provide safeguards for Trinity’s PACA rights, including any mechanism for actual payment.
- “Instead, the proposed Order granting Debtors’ Bidding Procedures Motion seeks to eviscerate the remedial purposes of the PACA trust by providing for credit bidding by secured lenders of Debtors to purchase PACA trust assets,” the motion reads.
- Trinity argues that PACA trust beneficiaries take complete priority in payment ahead of the claims of creditors and administrative costs and expenses incurred in bankruptcy court.