Chiquita Fresh North America, LLC v. Fierman Produce Exchange Inc. (198 F. Supp. 3d 171, 2016)

ORDER

SPATT, District Judge:

I. Background

On February 14, 2014, the Plaintiffs Chiquita Fresh North America, ■ LLC; Dole Fresh Fruit Company; S. Katzman Produce, Inc.; and Katzman Berry Corp. (collectively, the “Plaintiffs”) commenced this action under the Perishable Agricultural Commodities Act (“PACA”), 7 U.S.C. § 499e(c)(5), against Long Island Banana Corp. (“LI Banana”), Suffolk Banana Co., Inc. (“Suffolk Banana”), and their common principal, namely, Thomas J. Hoey. (“Thomas Jr.”).

In general, the complaint alleged that between December 3, 2013 and January 28, 2014, the Plaintiffs sold and delivered to the Defendants $718,515.85 worth of produce, for which the Defendants allegedly never paid. Under PACA, upon the Defendants’ receipt of the produce, a statutory trust (the “PACA Trust”) was created for the Plaintiffs’ benefit, which was comprised of the goods themselves and any related funds. Thus, the Plaintiffs allege in their complaint that they are beneficiaries of the PACA Trust, and as such, are entitled to recover the amounts due, plus interest, attorneys’ fees, and costs.

On the same date this action was commenced, the Plaintiffs also brought a motion by Order to Show Cause, pursuant to Fed. R. Civ. P. 55 and 65, seeking to preliminarily enjoin and temporarily restrain the Defendants from transferring or otherwise dissipating their assets up to the sum of $718,515.85, except for the purpose of making the payment owed to the Plaintiffs. The Court signed the Order to Show Cause and temporary restraining order, and made the motion returnable on March 13, 2014.

However, prior to the motion hearing, the parties informed the Court that they had agreed to the terms of a consent injunction and a procedure by which all creditors of the alleged PACA Trust could make claims and be heard in this action. In particular, the parties stipulated that the Defendants would actively preserve all trust assets and create a dedicated escrow account for this purpose. The parties also stipulated that potential creditors could seek to intervene and file a proof of claim to such assets on or before April 18, 2014.

On March 8, 2014, the Court entered an order effectuating the parties’ agreement.

On March 26, 2014, counsel for the Plaintiffs advised the Court that the Defendants were apparently attempting to negotiate the sale of certain real property located at 596 Merrick Road in Lynbrook (“596 Merrick Road”), which property the Plaintiffs believed to be controlled, although perhaps not owed by LI Banana, and therefore, an asset of the PACA Trust. Accordingly, the Plaintiffs sought an order directing the Defendants to deposit any proceeds from the sale of 596 Merrick Road into the dedicated escrow account for the benefit of the PACA creditors.

On March 28, 2014, the Defendants filed a letter opposing the relief sought by the Plaintiffs and disputing their claim that 596 Merrick Road constituted a PACA Trust asset. In particular, the Defendants asserted that 596 Merrick Road was purchased in 1985 with funds wholly unrelated to the Plaintiffs or the subject of this dispute; that 596 Merrick Road had not been used in connection with the Defendants’ business for approximately 25 years; and that 596 Merrick Road was, in actuality, vacant. The Defendants conceded that 596 Merrick Road was in contract to be sold, such contract having been scheduled to close one day earlier, namely, March 27, 2014.

In support of their opposition, the Defendants submitted an affidavit from Yolanda Hoey (‘Yolanda”), who is the sister of Thomas Jr. and the acting President and Owner of LI Banana and Suffolk Banana. In her affidavit, Yolanda stated that in approximately 1990 or 1991, LI Banana moved its operations away from 596 Merrick Road to a facility located at 28 Williams Street in Lynbrook (“28 Williams Street”). She stated that 596 Merrick Road has not been used in LI Banana’s business since that time, and has instead been rented to independent tenants unrelated to the Defendants or their business interests. She further stated that 596 Merrick Road is not actually owned by LI Banana, but by a separate entity called Brooke Enterprises. However, Thomas Jr. also controls and is the sole shareholder of Brooke Enterprises.

On March 28, 2014, 28 William Street Corp., the corporate landlord of the 28 Williams Street property (the “Landlord”), also filed a letter in this case. In relevant part, the letter stated that, at the time that this Court imposed the injunctive relief described above, the Landlord had been in the process of evicting LI Banana from 28 Williams Street based on its failure to pay rent. Apparently, after this Court granted the injunctive relief, the Defendants also sought a temporarily restraining order from a state housing court to halt the Landlord’s eviction efforts.

Further, the Landlord advised the Court that Thomas Jr. was, at that time, incarcerated in the Metropolitan Correction Center on unrelated criminal charges, and was allegedly attempting to liquidate the assets of LI Banana and Suffolk Banana. In particular, in addition to the scheduled closing on 596 Merrick Road, the Landlord also allegedly learned of a possible sale by the Defendants of a separate property located at 534 Merrick Road (“534 Merrick Road”). In this regard, the Landlord attached a copy of a Power of Attorney that Thomas Jr. executed in favor of non-party Alison Bretherick for the sole purpose of negotiating a sale of 534 Merrick Road.

In view of these facts, the Landlord requested that it be permitted to intervene; that the consent injunction entered into by the parties be expanded to include all creditors of the Defendants, rather than simply PACA Trust creditors; and that the Court appoint a receiver to properly liquidate the assets of LI Banana and Suffolk Banana for the benefit of the creditors.

Apparently, on April 1, 2014, Brooke Enterprises closed on the sale of 596 Merrick Road.

By letter dated April 3, 2014, the Defendants opposed the appointment of a receiver, contending that the Landlord, who is not a PACA Trust creditor, and whose only claim against the Defendants arises from a landlord-tenant dispute being litigated in state court, lacks standing to intervene in this action.

Also, apparently, on April 3, 2014, LI Banana and Suffolk Banana filed separate petitions for Chapter 11 bankruptcy relief in the Eastern District of New York, which placed in effect an automatic stay of the proceedings as against them. The Chapter 11 proceeding was eventually converted to a Chapter 7 proceeding.

On April 4, 2014, the Plaintiffs filed an amended complaint, which is now the operative pleading in this action. The amended complaint added the following Defendants: (i) the acting principal of LI Banana and Suffolk Banana, namely, Yolanda; (ii) the corporate owner of 596 Merrick Road, namely, Brooke Enterprises; (iii) the corporate owner of 534 Merrick Road, namely, H B Realty Corp., (“HB Realty”); and (iv) Stuls Holding Corp. (“Stuls”), an alleged alter ego of LI Banana and Suffolk Banana also controlled by Thomas Jr. In particular, the amended complaint alleged that these Defendants improperly received proceeds from sales by LI Banana and Suffolk Banana of quantities of produce, in violation of PACA’s trust provisions, and that they continue to wrongfully hold these assets.

The amended complaint also identified Fierman Produce Exchange, Inc. and Morris Okun, Inc. as Intervening Plaintiffs (collectively with the original Plaintiffs, the “Plaintiffs”), alleging that they, along with the original Plaintiffs, sold and delivered produce to the Defendants for which they were never paid. The total loss amount alleged in the amended complaint was increased from $718,515.85 to $737,272.76.

On April 4, 2014 and April 7, 2014, the Court held hearings at which counsel for several of the parties made oral arguments. In a written decision dated April 7, 2014, the Court granted the Plaintiffs’ request for an evidentiary hearing regarding the location of the proceeds of the sale of 596 Merrick Road, and whether that property constituted a PACA Trust asset subject to the parties’ consent injunction. However, due to calendar conflicts, the Court referred this matter to United States Magistrate Judge A. Kathleen Tom-linson to conduct the necessary hearing and prepare a report and recommendation on the outstanding issues.

On May 13, 2014, the parties filed a stipulation regarding LI Banana and Suffolk Banana’s Chapter 7 cases. In particular, the parties agreed that: (i) pursuant to orders of the bankruptcy court, (a) LI Banana and Suffolk Banana had abandoned their interests in the dedicated PACA escrow account, which then held $476,033.97, and (b) the automatic stay under the bankruptcy code was lifted as to those funds; and (ii) a settlement had been reached among the bankruptcy trustee, certain of the PACA Trust creditors, and other non-PACA creditors of LI Banana and Suffolk Banana regarding the distribution of approximately $678,500. The bankruptcy court approved this arrangement, and this Court So-Ordered the stipulation.

On referral from this Court, on June 23, 2014 and July 17, 2014, Judge Tomlinson held an evidentiary hearing, at which multiple witnesses gave testimony. By Civil Conference Minute Order dated July 17, 2014, the court reserved decision, and ordered that the assets of the Defendant entities were to be generally preserved in the interim.

II. The Report and Recommendation

On July 7, 2016, Judge Tomlinson issued a 57-page Report and Recommendation (the “R&R”), which, pursuant to Fed. R. Civ. P. 52(a), contained the court’s findings of fact and conclusions of law after the two-day evidentiary hearing. While the Court will not repeat Judge Tomlinson’s report in full, the following recommendations are relevant for present purposes.

Applying the test laid out in by the Second Circuit in In re Kornblum & Co. Inc., 81 F.3d 280, 284 (2d Cir.1996), Judge Tomlinson observed that, in order to establish that 596 Merrick Road is not an asset of the PACA Trust in this case, the burden rested with the Defendants to demonstrate that one of the following circumstances was true:

That (1) no PACA trust existed when [596 Merrick Road was] purchased; or that (2) even though a PACA trust existed at that time, [the property was] not purchased with trust assets; or that (3) although a PACA trust existed when [the property was] purchased and [the property was] purchased with trust assets[,] the debtor thereafter paid all unpaid sellers in full prior to the transactions involving the [PACA] Creditors, thereby terminating the trust.

Kornblum, 81 F.3d at 287.

As to the first factor, the court found that the Defendants failed to present any evidence establishing when the PACA Trust was created relative to Brooke Enterprises’ purchase of 596 Merrick Road. Nor did the Defendants address that question in them proposed findings of fact and conclusions of law. Therefore, Judge Tom-linson opined that the Defendants had not sustained their burden under the first step of the Komblum test of proving that no PACA Trust existed at the time the subject property was acquired.

As to the second factor, the court referred to the testimony of Thomas Hoey, Sr. (“Thomas Sr.”)—the father of Thomas Jr. and the former principal of both Brooke Enterprises and LI Banana—that he was one of a group of business partners who purchased 596 Merrick Road in 1986 for $993,440; that the group made a down payment of $300,000 at the closing; and that the partners used their personal funds—Thomas Sr.’s “savings”—and not money derived from the business operations of LI Banana or Suffolk Banana, to make the down payment. Judge Tomlinson found this testimony to be credible and concluded that the initial $300,000 Brooke Enterprises, acting through Thomas Sr. and his cohorts, paid to acquire 596 Merrick Road did not derive from PACA funds.

Nevertheless, Brooke Enterprises gave a mortgage on 596 Merrick Road for the approximately $693,440 balance remaining on the purchase price, which mortgage was satisfied on October 10, 1995. Judge Tom-linson found that unrebutted evidence presented at the hearing had established that the mortgage had been paid off using the proceeds of the sale of bananas by LI Banana and/or Suffolk Bannana—so-called “banana money.” Therefore, Judge Tom-linson concluded that Brooke Enterprises had used PACA funds to acquire 596 Merrick Road, and consequently, the property is appropriately considered an asset of the PACA Trust. As a result, the Defendants had also failed to sustain their burden under the second step of the Komblum test.

Finally, the court found that, although the evidence demonstrated a general pattern on the part of the Defendants to pay their suppliers’ invoices as they came due in the ordinary course of business, the record did not support a finding that LI Banana and Suffolk Banana attempted to pay all of their outstanding suppliers in full so as to terminate the PACA trust. Therefore, the Defendants failed to sustain their burden under the third step of the Komblum test.

Based on these findings, Judge Tomlin-son concluded that 596 Merrick Road was a PACA asset subject to the parties’ consent injunction in this case. Thus, inasmuch as the PACA creditors are entitled to have the proceeds of the April 1, 2014 sale of the property preserved for their benefit, the court inquired into the present whereabouts of those funds.

Initially, the Court notes that 596 Merrick Road was sold for $700,075. Based on the evidence at the hearing, Judge Tomlin-son determined that the funds were distributed as follows:

The Court notes that the R&R more fully describes the basis for certain of these figures being approximations, and the Court need not repeat those descriptions here. However, the Court will also note that Judge Tomlinson specifically addressed the fact that the sum of these distributions exceeds the total purchase price of $700,075. In this regard, she explained that:

This is not surprising considering Breth-erick’s testimony that she made other “limited” deposits in the Accounts in addition to the Sale Proceeds. It therefore appears that trust assets (ie., the Sale Proceeds) and non-trust assets may have been commingled in the Accounts. Since Bretherick opened the Accounts for the express purpose of depositing the Sale Proceeds, the Court finds that the Non-Debtor Defendants bear the burden of proving that any monies deposited into the Accounts were not traceable to the sale of produce and should not be treated as trust assets.

... The Non-Debtor Defendants did not attempt to make such a showing here. The Court therefore concludes that all funds which were (1) distributed at the April 1, 2014 closing and (2) distributed from and remain in the Accounts, are proceeds from the sale of [596 Merrick Road].

R&R at 52-53.

Based on these findings, Judge Tomlin-son concluded that, because 596 Merrick Road is a PACA Trust asset, the Plaintiffs are legally entitled to “reach the proceeds” from the sale of that property, and therefore, those holding the subject funds should be required to disgorge them. However, recognizing that these proceeds have apparently been widely distributed to various individuals and entities, Judge Tomlin-son noted that, generally, third parties who receive PACA trust property are not liable to the trust beneficiaries, ie., the Plaintiffs, “unless the PACA trustee’s act in giving the property was a breach of trust, and unless the third party had notice of the breach.” See R&R at 53 (quoting E. Potato Dealers, Inc. v. TNC Packing Corp., No. 08-cv-6280, 2011 WL 2669632, at *12, 2011 U.S. Dist. LEXIS 73025, at *38 (W.D.N.Y. July 6,2011)).

Applying this standard, the court found that the hearing record supported a finding that the Defendants breached the PACA Trust by permitting Brooke Enterprises to use proceeds from the sale of produce to pay off the mortgage on 596 Merrick Road. Thus, if the recipients of the sale proceeds cannot establish that they lacked notice of the breach or that they were otherwise bona fide purchases for value, then they may be compelled to disgorge the distributions.

Ultimately, Judge Tomlinson made the following recommendations to this Court:

(1) That Brooke Enterprises be compelled to disgorge the approximately $10,000 to $12,000 in sale proceeds in its possession in Hudson Valley Bank account number 2000728001, and that such funds be deposited in the PACA escrow account created in this action;

(2) That Yolanda Hoey be compelled to disgorge the $2,000 in sale proceeds distributed to her by way of check numbers 0096 and 109 drawn on Hudson Valley Bank account number 2000058806, and that such funds be deposited in the PACA escrow account created in this action; and

(3) Because the focus of the hearing was not on the potential liability of third-party transferees, at this juncture, the record is insufficient to determine whether the remaining distribu-tees of the sale proceeds outlined in the chart above may be compelled to disgorge the PACA Trust assets in their possession. However, it was recommended that this Court permit the Plaintiffs to seek such relief by way of motion on notice at a later date.

III. Conclusion

On July 7, 2016, the R&R was served on counsel for the parties via ECF.

More than fourteen days have elapsed since such service, and no objections have been filed.

Therefore, pursuant to 28 U.S.C. § 636(b) and Fed. R. Civ. P. 72, this Court has reviewed the R&R for clear error, and finding none, now concurs in both its reasoning and its result.

Accordingly, the July 7, 2016 Report and Recommendation is adopted in its entirety, and the Plaintiffs’ motion is granted as set forth herein. Within 20 days of the date of this Order, the Court directs the Plaintiffs to file a written status report on ECF outlining what actions, if any, remain to be taken in this case. Any party wishing to respond may do so in writing on ECF within 7 days after such filing by the Plaintiffs.

Finally, the Court extends its gratitude to Judge Tomlinson for all of her outstanding assistance in this matter.

It is SO ORDERED

REPORT AND RECOMMENDATION

A. KATHLEEN TOMLINSON, Magistrate Judge:

I. Preliminary Statement

Plaintiffs Chiquita Fresh North America, LLC, Dole Fresh Fruit Company, S. Katzman Produce Inc., and Katzman Berry Corp. (collectively, the “Original Plaintiffs”), and intervenor plaintiffs Fierman Produce Exchange Inc. and Morris Okun, Inc. (collectively, the “Intervenor Plaintiffs”) (together with the Original Plaintiffs, the “Plaintiffs”) bring this action against Long Island Banana Corp. (“LIB”) and Suffolk Banana Co. (“Suffolk Banana”) (collectively, where appropriate, the “Debt- or Defendants”), as well as Thomas J. Hoey (“Thomas Hoey, Jr”), Yolanda Hoey, Brook Enterprises, Ltd. (“Brook”), H B Realty Corp. (“HB Realty”), and Stuls Holding Corp. (“Stuls”) (collectively, the “Non-Debtor Defendants”), to enforce the trust provisions of Section 5(c) of the Perishable Agricultural Commodities Act, 7 U.S.C. § 499e(c) (“PACA”).

Presently before the Court is the motion filed by the Original Plaintiffs, joined in by the Intervenor Plaintiffs, seeking an Order directing that the proceeds from the sale of real property located at 596 Merrick Road in Lynbrook, New York (the “596 Property”) be deposited into the escrow account established pursuant to the consent preliminary injunction entered in this case (the “Consent Injunction”). DE 32. Judge Spatt referred Plaintiffs’ motion to this Court to hold an evidentiary hearing and to issue a Report and Recommendation addressing “(1) the issue of whether the 596 Property is a PACA asset subject to the Consent Injunction; (2) the issue of the present location of the proceeds from the sale of the 596 Property; and (3) any other issues which may be relevant.” Apr. 7, 2014 Order [DE 55]. In his Referral Order, Judge Spatt acknowledged that an automatic stay pursuant to 11 U.S.C. § 362(a) was in . effect with respect to LIB and Suffolk Banana, which filed for bankruptcy in the Eastern District of New York. Apr. 7, 2014 Order at 5.

This Court conducted an evidentiary hearing during which the Non-Debtor Defendants and Plaintiffs presented evidence. See DE 117, DE 121. In accordance with Rule 52(a) of the Federal Rules of Civil Procedure, the Court now issues its findings of fact and conclusions of law. After carefully considering the evidence introduced at the hearing, the arguments of counsel, and the controlling law on the issues presented, the Court concludes that (1) the 596 Property is a PACA asset subject to the Consent Injunction, and (2) the proceeds from the sale of the 596 Property have been distributed to defendants Brook and Yolanda Hoey, as well third-party entities and individuals set forth in more detail in this Report and Recommendation. The Court recommends to Judge Spatt that (1) defendants Brook and Yolanda Hoey be compelled to disgorge the proceeds they received from the sale of the 596 Property, and (2) to the extent Plaintiffs seek to compel third parties to disgorge the sale proceeds distributed to them, that Plaintiffs be permitted to make a motion seeking this relief.

II. Relevant Background

The Original Plaintiffs commenced this action on February 14, 2014 against the LIB, Suffolk Banana, and Thomas Hoey, Jr. (collectively, the “Original Defendants”) to enforce the trust provisions of Section 5(c) of PACA. See Compl. [DE 1], The Complaint alleges that between December 3, 2013 and January 28, 2014, Plaintiffs sold and delivered to the Original Defendants in interstate commerce wholesale quantities of produce worth $719,515.85 and that the Original Defendants failed to pay for the goods when payment was due. Id. ¶¶ 7-8.

The same day this action was filed, Judge Spatt entered a temporary restraining order prohibiting the dissipation or alienation of any assets of LIB and Suffolk Banana pending a hearing on the Original Plaintiffs’ motion for a preliminary injunction. See DE 15. On March 7, 2014, the parties agreed to the Consent Injunction which, inter alia, established an escrow account (“the PACA Escrow”), placed various restrictions on the assets and properties of LIB and Suffolk Banana, and set forth a procedure to assert PACA claims. Judge Spatt approved the Consent Injunction on March 8, 2014. See DE 23.

On March 26, 2014, the Original Plaintiffs filed the instant letter motion regarding the 596 Property. See DE 32. Specifically, the Original Plaintiffs contended that the Original Defendants were improperly negotiating the sale of the 596 Property which, according to the Original Plaintiffs, is a PACA trust asset “even if it is not owned by LIB or Suffolk Banana.” Id. Thq Original Plaintiffs requested that Judge Spatt (1) direct counsel for the Original Defendants to deposit the proceeds from the sale of the 596 Property into the PACA Escrow established pursuant to the Consent Injunction, and (2) schedule a hearing “to determine whether the Consent Injunction should be modified to vest the PACA Creditors with control over the sale of defendants’ assets.” Id. at 2.

The Original Defendants opposed the relief sought by the Original Plaintiffs. See DE 34. The Original Defendants contended that the acquisition of the 596 Property was never funded with any PACA proceeds or with any proceeds that could possibly be connected to the Original Plaintiffs. See id. Therefore, the Original Defendants asserted that neither the 596 Property nor the proceeds from its sale constitute PACA assets. See id. The Original Defendants further noted that “ownership of the 596 Property has been in the name of Brooke Enterprises, a separate entity now owned by Thomas Hoey, Jr.” Id.

Judge Spatt conducted a hearing on April 4, 2014, during which the parties and certain non-parties presented their arguments regarding the relief requested in the Original Plaintiffs’ motion. See Apr. 4, 2015 Civil Cause for Hearing [DE 58]; see also Apr. 7, 2014 Order at 4. The parties also informed Judge Spatt that, on April 3, 2014, LIB and Suffolk Banana had filed separate bankruptcy petitions in the Eastern District of New York seeking relief from their creditors pursuant to Chapter 11 of the Bankruptcy Code. See Apr. 7, 2014 Order at 4. Judge Spatt set this matter down for a continued hearing as to whether the proceeds of the sale of the 596 Property constituted a PACA asset, and further directed the attorney for the party in control of those proceeds, Lawrence Omansky, Esq. (“Attorney Omansky”), to appear at the continued hearing. See id. at 4-5.

Also on April 4, 2014, Plaintiffs filed an Amended Complaint, adding Yolanda Hoey, Brook, HB Realty, and Stuls as defendants. See generally Am.’ Compl. [DE 46]. The Amended Complaint alleges that, between November 27, 2013 and January 28, 2014, Plaintiffs sold and delivered to Defendants in interstate commerce wholesale quantities of produce worth $737,272.76 and that Defendants failed to pay for the goods when payment was due. Id. ¶¶ 6-7. The Amended Complaint further asserts the following causes of action against the various Defendants: (1) failure to pay trust funds against all Defendants; (2) failure to pay for goods sold against LIB and Suffolk Banana; (3) unlawful dissipation of trust assets by a corporate officer against Thomas Hoey, Jr.; (4) unlawful dissipation of trust assets by a corporate officer against Yolanda Hoey; (5) failure to make prompt payment of trust funds against Thomas Hoey, Jr., Yolanda Hoey, LIB, and Suffolk Banana; (6) breach of contract against LIB and Suffolk Banana; (7) unlawful retention of trust assets against Thomas Hoey, Jr., Yolanda Hoey, Brook, HB Realty and Stuls; (8) alter ego liability against LIB, Suffolk Banana, Brook, HB Realty, and Stuls; and (9) interest and attorneys’ fees against all Defendants. See id. ¶¶ 11-61.

On April 7, 2014, Judge Spatt continued the hearing originally commenced on April 4, 2014. See Apr. 7, 2014 Order at 5; Apr. 7, 2015 Civil Cause for Hearing [DE 59]. During the hearing, Judge Spatt learned that on April 1, 2014, Brook closed on the sale of the 596 Property and distributed the proceeds from the sale. See Tr. of Apr. 7, 2014 Hrg., at 46-47. Judge Spatt acknowledged that an automatic stay pursuant to 11 U.S.C. § 362(a) was in effect with respect to LIB and Suffolk Banana since they had filed for Chapter 11 bankruptcy. Apr. 7, 2014 Order at 5. However, Judge Spatt granted the Plaintiffs’ request for an evidentiary hearing as to (1) the present location of the proceeds from the sale of the 596 Property and (2) whether the 596 Property is a PACA asset subject to the Consent Injunction. Id.

Following the April 7, 2014 hearing, Judge Spatt issued an Order referring the matter to this Court to hold an evidentiary hearing and issue a Report and Recommendation addressing “(1) the issue of whether the 596 Property is a PACA asset subject to the Consent Injunction; (2) the issue of the present location of the proceeds from the sale of the 596 Property; and (3) any other issues which may be relevant.” Id. at 6. Judge Spatt further directed Plaintiffs “to immediately file a letter to the attention of this Court detailing their specific discovery requests, which will be subject to Court approval.” Id.

Plaintiffs thereafter submitted a letter to Judge Spatt requesting certain discovery in advance of the evidentiary hearing before this Court. See DE 54. Defendants opposed the Plaintiffs’ discovery requests and submitted their own requests for documents or information. See DE 60. Judge Spatt granted Plaintiffs’ requests to the extent of directing Defendants to provide Plaintiffs with the following:

(1) any and all documents or things in the possession, custody or control of defendants, their agents and attorneys related to the sale of the Premises by Brook Enterprises, Ltd., including but not limited to written agreements, closing statements, checks, corporate resolutions and powers of attorney; (2) any and all documents or things in the possession, custody or control of defendants, their agents and attorneys related to the acquisition by Thomas J. Hoey, Jr. of the stock or other ownership interests in Brook Enterprises, Ltd., including but not limited to written agreements, closing statements, checks, corporate resolutions and stock certificates; (3) any and all documents or things defendants plan to offer for identification or evidence at the hearing scheduled for May 14, 2014; and (4) the oral examination under oath of Thomas J. Hoey, Jr. pursuant to Fed. R. Civ. P. 30. The Court denies the Plaintiffs’ request for production of any and all documents or things in the possession, custody or control of defendants, their agents and attorneys related to the purchase by Brook Enterprises, Ltd. of the property located at 596 Merrick Road, Lynbrook, New York including but not limited to written agreements, closing statements, checks, corporate resolutions and powers of attorneyL]

Apr. 14, 2014 Order [DE 66] at 4. Judge Spatt also partially granted the Defendants’ requests by ordering the Plaintiffs to provide the Defendants with “(1) all current, valid PACA licenses for each of the Plaintiffs and (2) all documents or things the Plaintiffs intend to offer for identification or evidence at the hearing.” Id. Judge Spatt noted that “[w]hether and to what extent these items are admissible at the evidentiary hearing will be subject to the supervision of Judge Tomlinson.” Id. Judge Spatt clarified, in a subsequent Order, that in light of the automatic stay in effect against LIB and Suffolk Banana, these Defendants were not obligated to comply with the April 14, 2014 discovery order. See DE 70.

This Court conducted the evidentiary hearing on June 23, 2014 and July 17, 2014. See DE 117, DE 121. The Court heard testimony from the following witnesses: (1) Dennis Ench, a certified public accountant with Caparo, Centofranchi, Ti-dona & Ench Co. (“the Caparo Firm”) who has handled the accounts for Brook and Suffolk Banana since 1996, see Ench Test., 6/23/14 Tr„ at 19-41, 100-113; (2) Thomas Hoey, Sr., father of Thomas Hoey, Jr. and a former principal of LIB and Brook, see Hoey Sr. Test., 6/23/14 Tr., at 43-66; (3) Alan Centofranchi, a certified public accountant with the Caparo Firm who has handled the account for LIB since 1996, see Centofranchi Test., 6/23/14 Tr., at 57-92; (4) Denise Forte, an attorney who represented Thomas Hoey, Jr. in a 2003 transaction regarding the ownership of LIB, Suffolk Banana, and Brook, see Forte Test., 6/23/14 Tr., at 113-140; (5) Alison Bretherick, an individual authorized by Thomas Hoey, Jr. to sign on his behalf at the closing of the 596 Property and to distribute certain proceeds from that sale, see Bretherick Test., 7/17/14 Tr., at 6-49; and (6) John Balducci, Sr., a former principal of LIB and Brook, see Balducci Test., 7/17/14 Tr., at 50-73.

Upon the conclusion of the evidentiary hearing, the Court reserved decision. See DE 121. Plaintiffs and the Non-Debtor Defendants thereafter submitted their respective Proposed Findings of Fact and Conclusions of Law. See Non-Debtor Defs.’ Proposed Findings of Fact and Conclusions of Law (“PFF&CL”) [DE 123]; Pis.’ PFF&CL [DE 124].

On May 13, 2015, the parties filed a Stipulation regarding the status of the Debtor Defendants’ bankruptcy proceedings and the distribution of the PACA Escrow. See DE 144. The Stipulation states, among other things, that on March 12, 2015, the bankruptcy court determined that the Debtor Defendants’ interest in the PACA Escrow, which contains $476,033.97, “is deemed abandoned and the automatic stay provisions of 11 U.S.C. § 362 are no longer applicable to the PACA Escrow.” Id. at 3. The Stipulation further states that the bankruptcy trustee, certain PACA trust creditors, and other creditors of the Debtor Defendants have entered into a settlement agreement (the “Bankruptcy Settlement”) which contemplates that the distribution of settlement funds in the aggregate sum of $678,500.00 will be made to “all valid PACA trust creditors of LIB and Suffolk Banana.” Id. at 3-4. In light of these developments, the parties agreed to distribute the funds from the PACA Escrow and the Bankruptcy Settlement to Plaintiffs and other PACA creditors in the manner and proportions set forth in the Stipulation. See id. at 6. Following a letter from Plaintiffs stating that the Bankruptcy Settlement had been approved by the bankruptcy court, see DE 145, Judge Spatt “so ordered” the Stipulation on May 14, 2015. See DE 146.

III. Findings of Fact

The following section constitutes the Court’s Findings of Fact pursuant to Federal Rule of Civil Procedure 52(a)(1). These Findings are drawn primarily from the testimony elicited during the two-day evidentiary hearing, the parties’ exhibits and the pleadings, as well as the parties’ Proposed Findings of Fact where an issue of fact is undisputed.

A.Brook

Brook is a real estate company started by Thomas Hoey, Sr., Thomas Fitzsim-mons (“Fitzsimmons”), John Bower (“Bower”), and John Balducci (collectively, the “Business Partners”) in April 1986. See Hoey Sr. Test., 6/23/14 Tr., at 48:11-12; Balducci Sr. Test, 7/17/14 Tr., at 52:3-8; Brook Certifícate of Incorporation, Non-Debtor Defs.’ Ex. E. According to Thomas Hoey, Sr., the Business Partners “just started” Brook in 1986 and did not “buy” the company from anyone. Hoey Sr. Test., 6/23/14 Tr., at 48:11-14. John Balducci described Brook as the “real estate arm” of LIB’s business. Balducci Sr. Test, 7/17/14 Tr., at 52:3-8. Indeed, Brook was included as an “affiliate” of LIB on a combined balance sheet prepared for the 2012 tax year. See 2012 Combined Balance Sheet, Pis.’ Ex. 6; Ench Test., 6/23/14 Tr., at 48:11-12; see also Centofranchi Test., 6/23/14 Tr., at 72:25-73:l. However, Brook files its own tax returns, pays its own taxes and insurance, and maintains its own bank accounts. Ench Test., 6/23/14 Tr., at 22:24-23:2; 24:15-22; 25:6-7; Balducci Sr. Test, 7/17/14 Tr., at 71:17-22; see Brook’s 2008 Federal Tax Return, Pis.’ Ex. 4; Brook’s 2009-2012 Federal Tax Returns, Schedule K-l Forms, Non-Debtor Defs.’ Exs. H-K.

Brook is the former owner of the 596 Property, which was sold on April 1, 2014. See Ench Test., 6/23/14 Tr., at 23:21-22; Bretherick Test., 7/17/14 Tr., at 8:14-16; Apr. 1, 2014 Closing Statement, Pis.’ Ex. 12. Brook remains the owner of real property located at 590 Merrick Road, Lyn-brook, New York (“the 590 Property”). See Ench Test,, 6/23/14 Tr., at 23:21-22. Brook’s operations have consisted solely of renting out the 596 Property to LIB and renting out the 590 Property to independent parties. Id. at 24:5-9; 36:9-14. Brook is not engaged in the business of buying and selling agricultural commodities and does not maintain a PACA license. Id. at 23:15-20; Balducci Sr. Test, 7/17/14 Tr., at 71:12-16.

B. LIB and Suffolk Banana

It is undisputed that LIB and Suffolk Banana are entities licensed under PACA. See Non-Debtor Defs.’ PFF&CL ¶ 3; Pis.’ PFF&CL ¶ 1. Brook purchased LIB and the 596 Property as part of the same transaction on June 10, 1986. See June 10, 1986 Closing Statement, Pis.’ Ex. 1; Hoey Sr. Test., 6/23/14 Tr., at 44:24-45:25; 51:20-25.

C. Changes in Ownership of LIB, Suffolk Banana, and Brook

The ownership of LIB, Suffolk Banana, and Brook has changed at least twice since Ench and Centofranchi started working as the companies’ accountants in 1996. At that time, LIB, Suffolk Banana, and Brook were owned 70% by the John Balducci, Sr. and James Balducci, and 30% by Thomas Hoey, Sr. and Thomas Hoey, Jr. (collectively, “the Hoeys”). Ench Test., 6/23/14 Tr., at 23:9-10.

1. 1999 Ownership Transaction

In July 1999, John Balducci ceased his affiliation with LIB, Suffolk Banana, and Brook (the “1999 Ownership Transaction”). See Balducci Sr. Test, 7/17/14 Tr., at SILO-ES, 52:11-15; John Balducci Resignation Ltrs., Non-Debtor Defs’ Exs. B & C. As a result, James Balducci and the Hoeys each owned 50% of those companies. Ench Test., 6/23/14 Tr., at 31:7-17; Balducci Sr. Test, 7/17/14 Tr., at 52:3-7; July 14, 1999 Ltr re: Sale of Shares in LIB by John Balducci, Sr., Non-Debtor Defs.’ Ex. D.

John Balducci testified that he is familiar with PACA from having worked for PACA-licensed businesses for many years. See Balducci Sr. Test., 7/17/14 Tr., at 57:8-58:6. Balducci also testified that he is “aware” of the trust imposed on the assets of PACA entities and the potential for personal liability under PACA. See id, at 58:1-9. When asked whether, to his knowledge, all PACA creditors had been paid in full at the time he separated from LIB and Brook in 1999, John Balducci stated that he “didn’t think so because it is not the way business is conducted.” Id. at 68:14-19; see id. 72:16-21. He further explained: “From what I understand, when you separate a business and you take whatever is in that separation, and the one retaining the business has to assume the responsibility of paying the bills, which are PACA’s bills.” Id. at 68:9-13.

Centofranchi corroborated this testimony, stating that there was no concerted effort by LIB or Suffolk Banana to pay all of their PACA produce suppliers in full on the date of the 1999 Ownership Transaction. See Centofranchi Test., 6/23/14 Tr., at 92:12-18. Rather, the PACA accounts payable of LIB and Suffolk Banana were paid as the invoices came due and “[t]he business continued. They didn’t stop business.” Id. at 90:15-22, 93:4-7.

2. 2003 Ownership Transaction

In 2003, the ownership of LIB, Suffolk Banana, and Brook changed again when, as relevant here, James Balducci transferred his 50% interest in the companies to the Hoeys in exchange for the Hoeys’ interest in another company, 28 Williams Street Corp. (the “2003 Ownership Transaction”). See Ench Test., 6/23/14 Tr., at 32:2-8; Balducci Sr. Test., 7/17/14 Tr., at 52:22-53:4; 2003 Ownership Transaction Docs., Non-Debtor Defs.’ Exs. A1-A8. As a result of the 2003 Ownership Transaction, the Hoeys owned 100% of the stock in LIB, Suffolk Banana, and Brook, while James Balducci owned 100% of the stock in 28 Williams Street Corp. See 2003 Ownership Transaction Docs, Non-Debtor Defs.’ Exs. A1-A8; Ench Test., 6/23/14 Tr., at 32:2-8; 33:1-3.

Attorney Denise Forte represented Thomas Hoey, Jr. at the closing of the 2003 Ownership Transaction. See Forte Test., 6/23/14 Tr., at 114:15-19, 116:19-25. During the hearing, Forte reviewed a bill of sale, indemnity agreement, and stock purchase agreement which were executed as part of the 2003 Ownership Transaction and which related to James Balducci’s sale of his 50% interest in Brook. See id. at 125:6-127:14 (testifying as to Non-Debtor Defs.’ Exs. A1-A3). Forte testified that the bill of sale warrants that James Bal-ducci sold his shares in Brook “free and clear.” Forte Test., 6/23/14 Tr., at 125:9-16. The indemnity agreement states, in relevant part, that the seller “agrees to indemnify and hold Purchasers harmless from and against any and all losses, claims, loans to the Corporation or on the books of the Corporation,- obligations, liabilities, suits, actions, proceedings, judgments, fines, damages, penalties, costs, charges and expenses .... ” Brook Indemnity Release and Agreement, Non-Debtor Defs.’ Ex. A2. Forte testified that, in his opinion, the indemnity agreement “include[d] PACA claims.” Forte Test., 6/23/14 Tr., at 126:5-6. Forte further stated that, to his knowledge, the indemnification clause in the stock purchase agreement—which contains language similar to the indemnity agreement—was intended to cover PACA liabilities, particularly since the parties did not include a provision specifically excluding them. See id. at 127:11-14. However, Forte admitted that he was not aware of any discussions among the parties to the 2003 Ownership Transaction regarding PACA claims or whether LIB and Suffolk Banana’s produce suppliers had been paid in full as a consequence of that transaction. See id. at 128:6-25. Forte also testified that he did not know if any effort was made to pay off all of the produce suppliers, nor did he see any documents to that effect generated in connection with the closing of the 2003 Ownership Transaction. See id. at 129:10-17.

With regard to the 2003 Ownership Transaction, Centofranchi testified that LIB and Suffolk Banana continued “the normal course of operation” of paying their PACA creditors as their invoices came due and that “[njothing changed” as a result of the change of ownership. Centofranchi Test., 6/23/14 Tr., at 90:23-91:2. In particular, Centofranchi confirmed that, for both the 1999 and 2003 Ownership Transactions, the PACA creditors “weren’t paid in full. They remained as accounts payable.” Id. at 91:5-8.

3. Current Ownership

It is undisputed that Thomas Hoey, Jr. is a principal and shareholder of LIB and Suffolk Banana. See Non-Debtor Defs.’ Answer [DE 120] ¶ 4(c). Thomas Hoey, Jr. is also Brook’s primary shareholder and has been since at least 2008, according to Brook’s federal tax returns. See Brook’s 2008 Federal Tax Return, Schedule K-l Form, Pis.’ Ex. 4; Brook’s 2009-2012 Federal Tax Returns, Schedule K-l Forms, Non-Debtor Defs.’ Exs. H-K.

D. Brook’s Acquisition of the 596 Property

Brook purchased the 596 Property from Michael and Anthony Paolillo (“the Paolillo Brothers”) on June 10, 1986. See June 10, 1986 Closing Statement, Pis.’ Ex. 1; Hoey Sr. Test., 6/23/14 Tr., at 44:24-45:25; 51:20-25. As part of this transaction with the Paolillo Brothers, Brook also purchased all outstanding stock in LIB and another company, Cargo Transfer, Inc. (“Cargo”). See Closing Statement, Pis.’ Ex. 1. The total purchase price for this transaction was $993,400. See id. According to the June 10, 1986 Closing Statement, the purchase price was allocated as follows: (1) $200,000 for 330 shares of common stock in LIB; (2) $9,440 for 20 shares of common stock in Cargo; and (3) $782,000 for the 596 Property. See id.

At the June 10, 1986 closing, Brook paid $300,000 of the purchase price using (1) a $25,000 down payment, and (2) a certified check for $275,000. See id. According to Thomas Hoey, Sr., Brook did not use “banana money” to purchase LIB and the 596 Property because the Business Partners were not running a PACA business at the time of the acquisition. Hoey Sr. Test., 6/23/14 Tr., at 46:16-18; 55:9-19. Hoey Sr. testified that he contributed his own “savings” toward the purchase of LIB and the 596 Property. See id. at 46:9.

E. Mortgage on the 596 Property

To cover the remaining $693,444 of the purchase price, Brook gave the Paolillo Brothers a mortgage on the 596 Property. See June 10, 1986 Closing Statement, Pis.’ Ex. 1; Balducci Sr. Test., 7/17/14 Tr., at 55:2-13. According to the June 10, 1986 Closing Statement, the mortgage commenced on July 10,1986 at an interest rate of 10 ⅜ % and required Brook to make monthly payments of $8,333.34 for the first 60 months, followed by monthly payments of $11,083.34 for the last 60 months. See June 10, 1986 Closing Statement, Pis.’ Ex. 1. Brook satisfied the mortgage to the Paolillo Brothers on October 10, 1995. See Mortgage Satisfaction, Non-Debtor Defs.’ Ex. G.

John Balducci testified that he was involved in the acquisition of the 596 Property. See Balducci Sr. Test., 7/17/14 Tr., at 53:18-19. Balducci confirmed that a mortgage was issued in connection with Brook’s purchase of the 596 Property, that the Paolillo Brothers were the holders of that mortgage, and that the mortgage was eventually paid off before he ceased his affiliation with LIB, Suffolk Banana, and Brook in 1999. See id. 55:2-19; 72:4-15. When asked whether he knew the source of the funds used to pay off the mortgage, Balducci testified that “[t]he funds were created by the sale of bananas.” Id. at 55:20-25. In particular, Balducci testified as follows:

Q: Is it fair to say the sale from the produce of Long Island Banana was used to pay off the Paolillo mortgage?

A: Yes.

Q: And that would be true with regard to whether the mortgage was in the amount of $693,440 or $300,000; is that correct?

A: Yes.

Id. at 56:1-7.

F. LIB’s Rental Payments to Brook for the 596 Property

While Brook owned the 596 Property, LIB was the sole tenant and the only entity to pay rent to Brook for use of the premises. Ench Test., 6/23/14 Tr., at 36:9-14; 111:11-14; see Balducci Sr. Test., 7/17/14 Tr., at 71:8-11. From 1986 to approximately 1991, LIB operated out of the 596 Property. Hoey Sr. Test., 6/23/14 Tr., at 46:19-24. Sometime in 1991, LIB relocated its operations from the 596 Property to a facility located at 28 William Street, Lynbrook, New York. Id. at 46:25-47:23; see Ench Test., 6/23/14 Tr., at 33:4-6, 34:11-13; Balducci Sr. Test, 7/17/14 Tr., at 69:22-70:2. After relocating, LIB continued to use the 596 Property periodically for storage and parking trucks, but not for any other operations. Ench Test., 6/23/14 Tr., at 24:7-9; 30:24-31:6.

LIB made rental payments on the 596 Property directly to Brook. Id. at 42:2-10. For example, LIB’s bank statements show that Brook cashed checks for $1,600 in rental payments from LIB on November 14, 2013 and December 26, 2013. See LIB Citibank Statements, Pis.’ Ex. 8; Cento-franchi Test., 6/23/14 Tr., at 82:5-83:16. LIB’s Payable Register also indicates that Brook “billed” LIB for $1,600 in rental expenses on January 1, 8, 15, 22, and 29, 2014. See LIB Payable Register, Pis.’ Ex. 5; Ench Test., 6/23/14 Tr., 109:6-110:22. However, there was no lease agreement between Brook and LIB, and Ench testified that he did not know whether all the rental payments from LIB to Brook were in the amount of $1,600. Ench Test., 6/23/14 Tr., at 36:4-6, 102:13-14, 107:9-13; 110:23-25. Centofranchi also testified that he did not know how much or how often LIB paid rent to Brook. See Centofranchi Test., 6/23/14 Tr., at 75:11-12; 83:15-19.

G.Brook’s Income

From 2009 to 2012, Brook’s income consisted solely of the gross rents it received from renting out the 596 Property to LIB and from renting out the 590 Property to outside tenants, See Ench Test., 6/23/14 Tr., at 30:14-18, 30:24-31:6, 39:15-17; Brook’s 2009-2012 Fed. Tax Returns, Non-Debtor Defs.’ Exs. H-K. However, the evidence presented at the hearing does not indicate how much of Brook’s income derived from rental payments by LIB and how much derived from the rental payments by the tenants at the 590 Property. Both Ench and Centofranchi were questioned extensively on this topic, and neither accountant was able to itemize the sources of Brook’s income other than to say that it derived from rental payments by both LIB and the 590 Property tenants. For example, in reviewing Brook’s tax returns from 2009 to 2012, Ench confirmed Brook’s gross rental income for each tax year, but stated that he did not know the “breakdown” of how much of the income was derived from rental payments from LIB as opposed to payments by tenants at the 590 Property. See Ench Test., 6/23/14 Tr., at 35:18-36:3, 37:4-22, 38:1-18, 39:21-24. Moreover, in reviewing the entries for “Rental Income” deposits listed in Brook’s General Ledger for 2012, neither Ench nor Centofranchi could determine whether those payments came from LIB or the 590 Property tenants. See Centofranchi Test., 6/23/14 Tr., at 77:11-80:11; 88:22-89:13.

Centofranchi also testified that in addition to paying rent, LIB loaned money to Brook “over the years.” Id. at 84:2-3. Particularly, LIB’s General Ledger Trial Balance for 2012 indicates that LIB loaned $60,500 to Brook. LIB General Ledger Trial Balance, Pis.’ Ex. 4; see Centofranchi Test., 6/23/14 Tr., at 84:12-15. Centofranchi testified that he could not recall when this loan was first made or whether there was any consideration exchanged for the loan. Centofranchi Test., 6/23/14 Tr., at 85:10-20.

H. Payment of Real Estate Taxes on the 596 Property

Brook paid the real estate taxes on both the 596 Property and the 590 Property. See Ench Test., 6/23/14 Tr., at 35:9-11. Ench testified that, between 2009 and 2012, the income Brook used to pay the real estate taxes came from a combination of rental payments from LIB and rental payments from the tenants at the 590 Property. Id. at 41:24-42:1. In other words, the real estate taxes were paid at least in part with the rental income Brook received from LIB. See id. at 36:15-18.

I. Sale of the 596 Property

Brook sold the 596 Property to 596 Merrick LLC on April 1, 2014. See Apr. 1, 2014 Closing Statement, Pis.’ Ex. 12. Alison Bretherick appeared at the closing and “signed” on behalf of Thomas Hoey, Jr. with his permission. Bretherick Test., 7/17/14 Tr., at 7:6-19. The total sale price for the 596 Property was $702,697 with a balance due at closing of $676,106.82. See Apr. 1, 2014 Closing Statement, Pis.’ Ex. 12. According to the April 1, 2014 Closing Statement, the “net proceeds” of the sale (the “Sale Proceeds”) were distributed at the closing as follows: (1) $28,000 to Becker Realty; (2) to $50,000 to Brook; (3) $408,937.63 to Bretherick, (4) $27,000 to Lawrence A. Omansky IOLA, (5) $10,000 to Attorney Omansky for his “legal fee”; and (6) $176,137.37 to Advantage Title Company. See id. Thus, in total, $700,075 in Sale Proceeds were distributed at the closing. See id.

J. Location of the Proceeds from the Sale of the 596 Property

Bretherick testified regarding the location of the Sale Proceeds which were distributed at the closing to (1) Brook in the amount of $50,000, and (2) Bretherick in the amount of $408,937.63. See generally Bretherick Test., 7/17/14 Tr., at 9-49. Bretherick stated that she opened two checking accounts at Hudson Valley Bank—one in Brook’s name bearing account number 2000728001 (“the Brook Account”) and one in her name bearing account number 2000058806 (“the Bretherick Account”) (collectively, “the Accounts”). See id. 9:9-11; Checks, Pis.’ Ex. 13. Breth-erick then deposited $50,000 in Sale Proceeds into the Brook Account and $408,937.63 in Sale Proceeds into the Bretherick Account. Bretherick Test., 7/17/14 Tr., at 9:9-11. Bretherick further testified that, in addition to depositing the Sale Proceeds, she made other “limited” deposits into the Accounts, though she could not recall the exact amounts of those deposits. See Bretherick Test., 7/17/14 Tr., at 10:16-11:4, 22:7-17.

According to Bretherick, Thomas Hoey, Jr. directed her to open the Accounts and authorized her to “use the[ ] funds basically on his behalf.” Id. at 25:5-12, 28:12-15. Bretherick further testified that she is not an “employee” or a “director” of Brook, but that she has “power of attorney with regard to that entity.” Id. at 26:5-20.

During the hearing, Bretherick reviewed records of checks which had been written on the Accounts. See generally id. at 11-49; Checks, Pis.’ Ex. 13. Bretherick testified that Thomas Hoey, Jr. instructed her to write nearly all of the checks reflected in the bank records, though in some instances, she took it upon herself to make certain disbursements. See Bretherick Test., 7/17/14 Tr., 20:7-12, 29:14-25.

I. The Brook Account

According to the records entered into evidence during the hearing, the following checks were written on the Brook Account:

Check No. Pate Pavee Amount 311 April 7,2014 Alison Brethericlc S540 313 April 9,2014 Driscoll & Redlich $40,000 323 April 22, 2014 Alison Brethericlc $5,000 1001 April 25, 2014 Alison Bretheriek $5,000 1002 April 25,2014 Fischetti and Malgieri $25,000 1003 May 2, 2014 Alison Bretheriek $975 1004 May 15, 2014 Alison Brethericlc $975 TOTAL: $77,490

See Checks, Pis.’ Ex. 13. Bretheriek testified that, in addition to the checks reflected in the bank records, she may have written an additional check on the Brook Account for $750. Bretheriek Test., 7/17/14 Tr., at 11:9-11. Bretheriek estimated that approximately $10,000 to $12,000 remains in the Brook Account. See id. at 20:16-19, 25:18-21.

As noted above, a majority of the checks written on the Brook Account were to Bretheriek. Regarding the purposes of these checks, Bretheriek testified that (1) check numbers 311 and 323 were used for personal expenses like gas, tolls, groceries, and cable and utility bills; (2) check numbers 1003 and 1004 were used to pay for hotel rooms for Thomas Hoey, Jr.’s criminal defense attorneys, LaRusso and Conway, and to pay charges on Bretherick’s personal credit card bill, and (3) check number 1001 was never cashed. Id. at 13:7-25, 14:3-15; 34:12-21, 35:6-15. Bretheriek further testified that check number 1002 was written to Fischetti and Malgieri to pay for Thomas Hoey, Jr.’s “criminal defense.” Id. at 14:6-8. Finally, Bretheriek testified that, although check number 313 was issued to Driscoll & Redlich for a “lawyer retainer,” she believed the check was “never used” and was “never cashed.” Id. at 13:15-20; 23:10-20.

2. The Bretheriek Account

According to the records reviewed by Bretheriek during the hearing, the following checks were written on the Bretheriek Account:

Check No. Date Pavee Amount 0093 April 3,2014 Goetz Fitzpatrick $25,000 310 April 7, 2014 Alison Bretherick $6,537 319 April 7, 2014 Law Office of Brie Franz $100,000 095 April 9, 2014 Karp Auto $500 0094 April 3, 2014 Herrick Feinstein. $35,000 0096 April 8, 2014 Yolanda Hoey $1,000 318 April 11,2014 Law Office of Eric Franz $100,000 0098 April 11,2014 ICarp Auto $240.94 322 April 22,2014 Alison Bretherick $7,200 102 April 25,2014 Alison Bretherick $5,000 104 April 25, 2014 Alison Bretherick $4,000 317 April 22, 2014 Fischetti and Malgieri $25,000 101 April 23,2014 T&M Protection Services $9,000 103 April 25,2014 Herrick Feinstein $20,000 106 April 14,2016 Marie Hoey $5,000 0099 April 15,2014 T&M Protection Services $9,000 108 May 15,2014 Brian Kupchik $2,500 107 May 15, 2014 Brian Kupchik $2,500 110 May 23, 2014 Alison Bretherick $2,500 109 May 21, 2014 Yolanda Hoey $1,000 111 June 16, 2014 Goetz Fitzpatrick $15,000 112 June 18, 2014 Ellen Bruno $1,018,50 TOTAL: $376,996,44

See Checks, Pis.’ Ex. 13. In addition to the checks reflected in the records, Bretherick testified that she wrote three additional checks on the Bretherick Account to (1) Law Office of Eric Franz in the amount of $5,000, (2) Fischetti and Malgieri in the amount of $8,500, and (3) herself in an unknown amount to pay her rent for July 2014. See Bretherick Test., 7/17/14 Tr., at 15:18-25. Bretherick estimated that approximately $10,000 remains in the Breth-erick Account. See id. at 20:20-23.

According to Bretherick, the “majority” of the checks written on the Bretherick Account were paid to attorneys handling Thomas Hoey, Jr.’s affairs. See Bretherick Test., 7/17/14 Tr., at 20:20. Specifically, Bretherick testified that the checks issued to Goetz Fitzpatrick and Herrick Feinstein were to pay Thomas Hoey, Jr.’s “business attorneys” while the checks issued to the Law Office of Eric Franz and Fischetti and Malgieri covered legal fees related to Thomas Hoey, Jr.’s “criminal defense.” See, e.g., id. at 16:2-5,19-23,17:10-13, 18:6-17. Similarly, the checks issued to T&M Protection Services were for Thomas Hoey, Jr.’s “investigators” and the check to Ellen Bruno was payment for trial transcripts. 'See, e.g., id. at 18:10-13, 19:2-5, 19:20-22. Bretherick also testified that Thomas Hoey, Jr. instructed Bretherick to write the checks to Hoey’s sister, Yolanda Hoey, and his mother, Marie Hoey. See, e.g., id. at 18:18-25, 19:14-16, 26:1, 39:21-40:10. The remaining checks were used to pay for Bretherick’s personal expenses— such as her rent, car lease payments, credit card charges, groceries, and utility bills, among other things—as well as some “limited” business expenses. See, e.g., id. at 17:18-24, 37:23-38:4, 38:13, 40:16-42:4, 43:22-44:20.

IV. Conclusions of Law

A. PACA Background

“Congress enacted PACA in 1930 to regulate the interstate sale and marketing of perishable agricultural commodities.” Coosemans Specialties, Inc. v. Gargiulo, 485 F.3d 701, 705 (2d Cir.2007) (citing Am. Banana Co., Inc. v. Republic Natl Bank of New York, 362 F.3d 33, 36 (2d Cir. 2004)); see R Best Produce, Inc. v. Shulman-Rabin Mktg. Corp., 467 F.3d 238, 241 (2d Cir.2006) (citing H.R. Rep. No. 98-543, at 3 (1983), reprinted in 1984 U.S.C.C.A.N. 405, 406)). “In 1984, Congress amended PACA ‘by adding Section 499e(c), which requires licensed dealers to hold all perishable commodities purchased on short-term credit, as well as sales proceeds, in trust for the benefit of unpaid sellers.’ ” Jacob’s Vill. Farm Corp. v. Yusifov, No. 14-CV-4109, 2015 WL 5693706, at *5 (E.D.N.Y. Sept. 28, 2015) (quoting Am. Banana, 362 F.3d at 37); see Coosemans Specialties, 485 F.3d at 705. Section 499e(c) provides, in relevant part, as follows:

Perishable agricultural commodities received by a commission merchant, dealer, or broker in all transactions, and all inventories of food or other products derived from perishable agricultural commodities, and any receivables or proceeds from the sale of such commodities or products, shall be held by such commission merchant, dealer, or broker in 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 unpaid suppliers, sellers, or agents.

7 U.S.C. § 499e(c)(2).

“The purpose of the [PACA] trust is ‘to increase the legal protection for unpaid sellers and suppliers of perishable agricultural commodities until full payment of sums due have been received by them.’ ” R Best Produce, 467 F.3d at 241 (quoting H.R. Rep. No. 98-543, at 2 (1983)); see Coosemans Specialties, 485 F.3d at 705 (“The statute provides growers and sellers of agricultural produce with ‘a self-help tool enabling them to protect themselves against the abnormal risk of losses resulting from slow-pay and no-pay practices by buyers or receivers of fruits and vegetables.’ ”) (quoting D.M. Rothman & Co. v. Korea Commercial Bank of N.Y., 411 F.3d 90, 93 (2d Cir.2005)); see also Jacob’s Vill. Farm, 2015 WL 5693706, at *5 (“[A]s the Second Circuit has recognized, ‘the legislative history and the text of PACA as well as the implementing regulations all make clear that [PACA] trust assets are intended exclusively to benefit produce suppliers.’ ”) (quoting R Best Produce, 467 F.3d at 242) (alteration omitted). Accordingly, Section 499e(c)(2) imposes “a non-segregated floating trust” on the produce buyer’s perishable commodities and their derivatives, and, in turn, affords produce sellers “a highly unusual trust beneficiary status that permit[s] them, in the case of defaults, to trump the buyers’ other creditors, including secured ones.” Am. Banana, 362 F.3d at 38; see A & J Produce Corp. v. Bronx Overall Econ. Dev. Corp., 542 F.3d 54, 57-58 (2d Cir.2008) (quoting Endico Potatoes, Inc. v. CIT Group/Factoring, Inc., 67 F.3d 1063, 1067 (2d Cir.1995)).

Under ordinary principles of trust law, which apply in PACA actions, “the Produce Debtor holds the legal title to the Produce and its derivatives or proceeds but the seller retains an equitable interest in the trust property pending payment.” In re Kornblum & Co., Inc., 81 F.3d 280, 284 (2d Cir.1996); see R Best Produce, 467 F.3d at 242; Jacob’s Vill. Farm, 2015 WL 5693706, at *5 (“PACA trusts are governed by general principles of trust law ‘unless such law directly conflicts with the PACA statute.’ ”) (quoting DM. Rothman, 411 F.3d at 94). Thus, in the event of the produce buyer’s bankruptcy, “the Bankruptcy Code excludes PACA trust assets from the bankruptcy estate.” In re Kornblum, 81 F.3d at 284; see, e.g., Weis-Buy Farms, Inc. v. Quality Sales LLC, No. 11-CV-2011, 2012 WL 280617, at *10 (D.Conn. Jan. 31, 2012); Atl. Tropical Produce Corp. v. El Nene Meat & Food Corp., No. 06-CV-2413, 2009 WL 436050, at *5 (S.D.N.Y. Feb. 23, 2009), affd sub nom. Atl. Tropical Produce Corp. v. AFS Capital, LLC