           RECOMMENDED FOR FULL-TEXT PUBLICATION
                Pursuant to Sixth Circuit Rule 206                         2    Overton Distributors, Inc.                  No. 02-5261
        ELECTRONIC CITATION: 2003 FED App. 0292P (6th Cir.)                     v. Heritage Bank
                    File Name: 03a0292p.06
                                                                                               _________________
UNITED STATES COURT OF APPEALS                                                                      COUNSEL
                  FOR THE SIXTH CIRCUIT                                    ARGUED: Richard L. Colbert, COLBERT & WINSTEAD,
                    _________________                                      Nashville, Tennessee, for Appellant. Stephen P. McCarron,
                                                                           McCARRON & DIESS, Washington, D.C., for Appellee.
 OVERTON DISTRIBUTORS,            X                                        ON BRIEF: Richard L. Colbert, W. Gregory Miller, J. Frank
 INC.,                             -                                       Rudy, Jr., COLBERT & WINSTEAD, Nashville, Tennessee,
              Plaintiff-Appellee, -                                        for Appellant. Stephen P. McCarron, McCARRON &
                                   -   No. 02-5261                         DIESS, Washington, D.C., for Appellee.
                                   -
             v.                     >                                                          _________________
                                   ,
                                   -                                                               OPINION
 HERITAGE BANK,                    -                                                           _________________
           Defendant-Appellant. -
                                   -                                         RONALD LEE GILMAN, Circuit Judge. Overton
                                  N                                        Distributors, Inc. supplied produce to Quality Foods of
       Appeal from the United States District Court                        Tennessee, Inc. between 1993 and 2000. Quality went out of
     for the Middle District of Tennessee at Nashville.                    business in January of 2000, leaving an unpaid debt to
       No. 00-00284—John T. Nixon, District Judge.                         Overton of over $220,000 for produce purchased between
                                                                           October of 1999 and January of 2000. Overton now seeks to
                      Argued: July 29, 2003                                recover this unpaid debt from Heritage Bank, Quality’s
                                                                           lender, by invoking the statutory trust provisions of the
             Decided and Filed: August 15, 2003                            Perishable Agricultural Commodities Act (PACA), 7 U.S.C.
                                                                           §§ 499a-499t, a statute enacted in 1930 to regulate the sale of
        Before: GILMAN and GIBBONS, Circuit Judges;                        perishable agricultural commodities.
                JORDAN, Senior District Judge.*
                                                                              In 1996, Quality entered into an agreement with Heritage
                                                                           Bank that allowed Quality to obtain advances against the
                                                                           value of its accounts receivable. Approximately 90% of these
                                                                           accounts receivable arose from the sale or resale of produce
                                                                           covered by PACA. The owners of Quality filed a Chapter 7
                                                                           bankruptcy petition in July of 2000. This caused Overton to
                                                                           sue Heritage to recover its losses, contending that the bank’s
    *
                                                                           agreement with Quality constituted a breach of Overton’s
      The Honorab le R. Leon Jordan, Senior United States District Judge   statutory trust, and that the bank had received the proceeds of
for the Eastern District of Tennessee, sitting by designation.

                                   1
No. 02-5261                   Overton Distributors, Inc.      3    4      Overton Distributors, Inc.                  No. 02-5261
                                      v. Heritage Bank                    v. Heritage Bank

Overton’s produce that were subject to the PACA trust                  The perishable agricultural commodities listed on this
provisions.                                                            invoice are sold subject to the statutory trust authorized
                                                                       by section 5(c) of the Perishable Agricultural
   In ruling on the parties’ cross-motions for summary                 Commodities Act, 1930 (7 U.S.C. 499e(c)). The seller of
judgment, the district court held that Overton had properly            these commodities retains a claim over these
preserved its statutory trust benefits under PACA, leaving the         commodities, and any receivables or proceeds from the
other issues for resolution at trial. The district court               sale of these commodities until full payment is received.
subsequently ruled for Overton following a two-day bench
trial, concluding that the agreement between Quality and             Quality consistently paid Overton on an irregular and tardy
Heritage constituted a breach of Overton’s statutory trust.        basis, often taking between 40 and 60 days to pay an invoice.
Overton, in the court’s opinion, was thus entitled under           Overton regularly called Quality about its slow payments on
PACA to assert a superior claim to the proceeds from the sale      the account, but it never required Quality to strictly abide by
of its produce that were acquired by Heritage from Quality.        any specific terms of payment. Grossman testified that
For the reasons set forth below, we REVERSE the judgment           Overton tolerated Quality’s late payments because Overton
of the district court and REMAND with instructions to              thought that Quality would eventually pay.
dismiss Overton’s complaint.
                                                                      Heritage provided banking services to Quality throughout
                    I. BACKGROUND                                  the latter’s existence. For many of the years in which it
                                                                   conducted business, Quality had difficulty making its
A. Factual background                                              payments, often writing checks on insufficient funds that
                                                                   Heritage covered.         Quality entered into a financing
   In late 1993, shortly after Overton began selling produce to    arrangement with Heritage in 1996 called the Business
Quality, it sent a letter to Quality providing that the latter     Manager Agreement (BMA). The BMA provided for the sale
would pay Overton’s invoices within 10 days of a 15-day            of Quality’s accounts receivable to Heritage, with Heritage
accrual cycle. That is, all of the invoices were to be paid        advancing Quality payment for those receivables, less a 2.5%
within 25 days of Quality’s receipt of the produce. Charlain       service charge. But the BMA contained numerous provisions
Jarman-Hall, one of the principals of Quality, countersigned       limiting Heritage’s exposure. Quality, for example, remained
the letter and returned it to Overton in early 1994. For the       liable for all of the advances it received from Heritage should
next four years, Overton’s invoices to Quality reflected these     the proceeds from the accounts receivable not cover the
payment terms. Then, in 1998, Overton’s invoices to Quality        amount of the funds advanced. Heritage could also reassign
were unilaterally changed to provide that payment was to be        any account receivable to Quality in case of default, it could
received within 10 days after the end of each calendar month       debit any of Quality’s accounts without notice to pay any
in which produce was delivered. Cathy Grossman, Overton’s          deficiencies, and it could demand that Quality pay any
director of Business Development, changed the payment              shortfall to the bank. Finally, the BMA contained a blanket
terms because Quality’s payments were typically late and           security interest on all of Quality’s assets and a representation
subject to her boss’s criticism. Overton’s invoices at this time   that Quality’s receivables were free and clear of all security
also contained the following statement:                            interests, liens, and claims of third parties.
No. 02-5261                   Overton Distributors, Inc.      5    6    Overton Distributors, Inc.                  No. 02-5261
                                      v. Heritage Bank                  v. Heritage Bank

   In January of 2000, Quality went out of business, leaving       than 30 days after acceptance, this agreement must be in
Overton with more than $220,000 in produce delivered to            writing. The seller must also disclose these non-statutory
Quality for which Overton had never been paid. Heritage,           payment terms “on invoices, accountings, and other
which had acquired the accounts receivable from Quality’s          documents relating to the transaction.” 7 U.S.C. § 499e(c)(3);
resale of the produce, became the focus of Overton’s               7 C.F.R. § 46.46(e)(1).
attention.
                                                                     Thirty days is the maximum allowable payment term under
B. Statutory background                                            PACA regulation 7 C.F.R. § 46.46(e)(2), which provides as
                                                                   follows: “The maximum time for payment for a shipment to
  One of the purposes of PACA is to protect unpaid sellers of      which a seller, supplier, or agent can agree and still qualify
perishable agricultural commodities. In 1984, Congress             for coverage under the trust is 30 days after receipt and
amended PACA to create a statutory trust in their favor.           acceptance of the commodities . . . .” This limitation exists
7 U.S.C. § 499e(c); Endico Potatoes, Inc. v. CIT                   because the statute is intended to protect only those produce
Group/Factoring, Inc., 67 F.3d 1063, 1067 (2d Cir. 1995)           sellers making short-term credit arrangements. H.R. Rep. No.
(“[D]ue to the need to sell perishable commodities quickly,        98-543 at 7 (1983), reprinted in 1984 U.S.C.C.A.N. 405, 410
sellers of perishable commodities are often placed in the          (“[T]he committee does not intend the trust to apply to any
position of being unsecured creditors of companies whose           credit transaction that extends beyond a reasonable period.”).
creditworthiness the seller is unable to verify.”). The trust
protects the sellers against financing arrangements made by        C. Procedural background
merchants, dealers, or brokers who encumber or give lenders
a security interest in the commodities or the receivables or          Because Quality was insolvent, Overton sued Heritage to
proceeds from the sale of the commodities, thus giving the         recover the amount of its unpaid invoices owed by Quality.
claims of these sellers precedence over those of secured           Overton maintained that it had properly preserved its claim to
creditors.                                                         trust benefits under PACA, that the BMA between Quality
                                                                   and Heritage constituted a breach of the PACA trust, and that
   The statute and the federal regulations expressly lay out the   Overton was therefore entitled to recover from Heritage.
steps that a produce seller must take to come within PACA’s        Heritage responded by arguing that Overton had not properly
protection. 7 U.S.C. § 499e(c)(3) and (4); 7 C.F.R.                preserved its trust benefits, and that, even if it had, the BMA
§§ 46.2(aa) and 46.46(e). Under all circumstances, the seller      represented a bona fide sale of the accounts receivable to the
must give the buyer written notice of the seller’s intention to    bank, not a security interest that would allow Overton to
preserve its trust benefits. Congress further amended PACA         claim priority over these funds.
in 1995 by allowing sellers to provide this notice on the
invoices given to the buyer. If the seller and the buyer use the     The district court, in partially granting Overton’s motion
default payment terms provided in the regulations (“within 10      for summary judgment, found that Overton had properly
days after the day on which the produce is accepted”), this        preserved its PACA trust benefits. A two-day bench trial
notice of intent to preserve benefits is all that is necessary.    followed to resolve the remaining issues. In an order dated
On the other hand, if the parties agree to payment terms           January 7, 2002, the district court concluded that the BMA
greater than 10 days after acceptance, but in no event more        constituted a breach of the trust. The court also held that
No. 02-5261                  Overton Distributors, Inc.     7    8     Overton Distributors, Inc.                   No. 02-5261
                                     v. Heritage Bank                  v. Heritage Bank

Heritage’s bona-fide-purchaser defense was without merit. It     compliance with PACA, payment was due within the 30-day
therefore ordered Heritage to pay Overton the full amount due    maximum allowed by the regulations. In addition, Overton
from Quality plus prejudgment interest. This timely appeal       included on all of the relevant invoices a statement of its
followed.                                                        intention to preserve its PACA trust benefits. Overton failed,
                                                                 however, to place the payment terms as agreed to in the 1994
                      II. ANALYSIS                               written agreement on these invoices. Instead, the payment
                                                                 terms on all invoices from 1998 forward were “10 days
A. Standard of review                                            EOM,” establishing that the payment was due within 10 days
                                                                 after the end of each calendar month in which produce was
  Heritage appeals both the district court’s bench-trial         delivered. Because payments for produce delivered on the
decision and its order granting partial summary judgment to      first of the month could be made as late as 40 days after the
Overton. “In considering a district court’s decision following   date of acceptance, the invoices indicated that Overton was
a bench trial, this court reviews findings of fact under the     agreeable to a payment schedule outside of PACA’s
clearly erroneous standard. Conclusions of law, on the other     protection.
hand, are reviewed de novo. We also review de novo the
district court’s grant of summary judgment.” Burzynski v.          Overton presented two alternate theories to avoid the
Cohen, 264 F.3d 611, 616 (6th Cir. 2001) (internal citations     consequences of its failure to comply with PACA’s
omitted).                                                        requirements: (1) the very fact that the parties’ 1994
                                                                 agreement and the payment terms on the relevant invoices
  Summary judgment is proper where no genuine issue of           differ indicates that the agreement was ambiguous and, as a
material fact exists and the moving party is entitled to         result, no agreement at all; and (2) the different terms on the
judgment as a matter of law. Fed. R. Civ. P. 56(c). In           invoices were the result of a clerical error, and that Overton
considering such a motion, the court must construe all           should be given the benefit of the doubt due to its good faith
reasonable factual inferences in favor of the nonmoving party.   effort to substantially comply with PACA.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986). The central issue is “whether the evidence         In order to bring Overton within the statute’s protection, the
presents a sufficient disagreement to require submission to a    district court adopted both of the above theories. It used the
jury or whether it is so one-sided that one party must prevail   1998-2000 invoices to find ambiguity in the unambiguous
as a matter of law.” Anderson v. Liberty Lobby, Inc., 477        1994 writing expressing the parties’ agreement, and it
U.S. 242, 251-52 (1986).                                         examined the record as a whole to give Overton the benefit of
                                                                 the doubt. But the statutory language is quite clear. Absent
B. The district court erred in concluding that Overton           a written agreement altering the payment terms set in 1994,
   had preserved its trust benefits pursuant to the              all of the subsequent invoices from Overton to Quality were
   provisions of PACA                                            required to disclose the agreed terms of payment. 7 U.S.C.
                                                                 § 499e(c)(3); 7 C.F.R. § 46.46(e)(1).
  In early 1994, Quality confirmed the payment terms of 10
days within a 15-day accrual by countersigning and returning       The parties had clearly agreed in 1994 to terms different
Overton’s letter that set forth this understanding. Thus, in     from the standard 10-day payment provision contained in the
No. 02-5261                   Overton Distributors, Inc.       9    10    Overton Distributors, Inc.                   No. 02-5261
                                      v. Heritage Bank                    v. Heritage Bank

PACA regulations. Consequently, PACA and the regulations            (“Unless the terms of the statute are met, [PACA] specifies
mandate that those terms had to be disclosed on the invoices.       that the benefits of the trust are lost.”). We agree with the
Overton cannot have it both ways. It cannot, on the one hand,       Ninth Circuit’s analysis.
list terms on its invoices that are not only different from those
mutually agreed upon, but also permit payment outside of               Overton argues that the 1998-2000 invoice-payment terms
PACA’s requirements, and then on the other hand argue that          are an alteration that rendered the earlier agreement
it has substantially complied with PACA.                            ambiguous or void. As previously indicated, however, we
                                                                    find no factual or legal support for Overton’s position. Its
   There are no Sixth Circuit cases dealing with the                alternative contention that the incorrect terms were placed on
preservation of trust benefits under PACA. The two cases            the invoices due to a clerical error is also without merit.
from other circuits relied on by the district court deal with       Overton’s Director of Business Development testified that the
oral agreements that extended the payment terms beyond the          change extending the payment term was made in 1998
standard 10-day statutory provision. Idahoan Fresh v.               because Quality’s payments were typically late. This was
Advantage Produce, Inc., 157 F.3d 197 (3d Cir. 1998)                consistent with Overton’s practice of not requiring Quality to
(holding that PACA’s requirement that an agreement to               abide by any specific terms of payment, which often was
extend the payment period be in writing relates to the              received 40 to 60 days after invoice. Overton was of course
enforceability of an agreement to extend a payment term, but        free as a business matter to provide lenient payment terms to
does not disqualify an unpaid seller from receiving trust           Quality, but by doing so it failed to preserve its trust benefits
benefits); Hull Co. v. Hauser’s Foods, Inc., 924 F.2d 777 (8th      under PACA. 7 U.S.C. § 499e(c)(3); 7 C.F.R. § 46.46(e)(2).
Cir. 1991) (holding that oral agreements between produce
sellers and buyers as to payment terms beyond the standard             Even though the payment terms included on the relevant
10 days after delivery had no effect on the seller’s right to       invoices had the effect of requiring payment within thirty
trust protection under PACA). The statute, however, imposes         days on shipments that happened to be made after the tenth
strict disclosure obligations relating to written agreements        day of the prior month, Congress’s purpose in enacting PACA
that extend the payment terms, and there is no dispute about        was to protect sellers delivering their produce on essentially
the contents of the parties’ 1994 agreement. As a result, these     cash terms, not to provide protection to sellers who are
cases provide little guidance for the situation presented here.     willing to extend payment terms beyond the statutory
                                                                    maximum. See Hiller Cranberry Prods., Inc. v. Koplovsky,
  The Ninth Circuit case of Bowlin & Son, Inc. v. San               165 F.3d 1, 12 (1st Cir. 1999) (Selya, J. dissenting) (“Those
Joaquin Food Service, Inc. (In re San Joaquin Food Service,         courts that have addressed claims involving payment terms of
Inc.), 958 F.2d 938 (9th Cir. 1992), presented facts more           more than thirty days uniformly have held PACA inapplicable
analogous to those before us. In Bowlin, the parties had a          on the ground that the thirty-day maximum period is to be
written agreement that extended the payment terms beyond            imposed as written.”). This interpretation has the significant
the standard 10-day statutory provision, but the seller failed      commercial advantage of putting third parties such as
to include these terms on its invoices. Id. at 939. The court       Heritage on notice as to whether or not the invoice-payment
held that the benefits of the trust were lost. Id. at 940. The      terms themselves make the produce sale in question subject
Bowlin court also held that the seller’s argument that it had       to PACA trust protection, without the onerous requirement of
substantially complied with the statute failed. Id. at 940          having to ascertain the precise delivery date of each particular
No. 02-5261                   Overton Distributors, Inc.     11
                                      v. Heritage Bank

shipment. Furthermore, in the case before us, Overton neither
argued that we should ascertain individual delivery dates nor
made any effort to segregate deliveries made within the first
10 days of each billing cycle from those made thereafter.
   Because Overton’s 40-day maximum payment term failed
to preserve its trust benefits under PACA, it is not entitled to
assert priority over Quality’s accounts receivable that arose
from the sale of Overton’s produce. We therefore have no
reason to resolve the issue of whether Quality’s BMA with
Heritage was in fact only a security interest in Quality’s
accounts receivable or whether Heritage was a bona fide
purchaser for value of those accounts.
                    III. CONCLUSION
  For all of the reasons set forth above, we REVERSE the
judgment of the district court and REMAND with
instructions to dismiss Overton’s complaint.
